Payment of service tax by main contractor cannot absolve sub-contractor.

PJ/CASE LAW/2015-16/2577

Case:- BAKRESWAR CO-OP. MULTIPURPOSE LTD. VERSUS COMMR. OF C. EX., BOLPUR

Citation:-2014 (36) S.T.R. 1059 (Tri. - Kolkata)

Brief facts:- This is an application filed seeking waiver of pre deposit of Service Tax of Rs. 1.18 crores and equal amount of penalty imposed under Section 78 of the Finance Act, 1994 and penalty under Section76 (not quantified) and Rs. 5,000/- under Section 77(1A) and Rs. 5,000/- under Section 77(2) of the Finance Act, 1994.

Appellant’s contention:- The ld. Advocate Shri S.N. Sinha Mahapatra for the applicant submits that the applicant is a co-operative society comprising of local persons who provide services of manpower to Bakreswar Thermal Project as sub-contractor to various contractors, M/s. DC Industrial Plant Service Pvt. Ltd., M/s. P.E. Electors Pvt. Ltd., M/s. Bridge & Roof Co. (India) Ltd. The said contractors have been appointed by M/s. West Bengal Power Development & M/s. BHEL for the said project. He submits that the co-operative society is more or less working on no profit no loss basis. It is his submission that since the value of the manpower supply received from the said contractor are included in the total project cost, and once the main contractor/service receiver had discharged Service Tax on the total value including the value of labour supplied by the applicant, no Service Tax is required to be paid by the applicant separately. The ld. Advocate also placed reliance on various services rendered by the principal contractors. The ld. Advocate further submitted that they had already deposited an amount of Rs. 5.00 lakhs.

Respondent’s contention:- Ld. AR for the Revenue submits that the main contractors have deposited the Service Tax in respect of the services they have rendered to Bakreswar Thermal Power Project. It is his submission that even though in the Taxable value of said services rendered by the maincontractors, the value of manpower supply services rendered by theapplicant are also included, it cannot absolve the applicant from the liability of Service Tax on manpower supply service as both are independent service provider and the services are also different. It is his submission that the claim of the applicant that as a sub-contractor, the main contractor has discharged the service tax in the present circumstances, cannot hold good as the service provider and the services rendered in each case are different.

Reasoning of judgment:- They find that thepresent service tax demand is raised on the applicant, who suppliedmanpower to service receivers, who in turn rendered constructionservices to the thermal project. It is the claim of the applicant that as a sub-contractor to the service receiver, the amount of Service Tax paid by the service receiver on the total taxable value of construction service, be considered as discharge of their Service Tax liability. The Revenue on the other hand disputes that the service receiver has received the services under the category of manpower supply and rendered services under the category of construction services. Therefore, the service tax paid by the service receiver under the head ‘construction services’ cannot absolve the present applicant from the liability of Service Tax on manpower supply service. Prima facie, they agree with the Revenue for the simple reason that to avoid double taxation, mechanism of Cenvat credit has been introduced in the system. In the event, the Service Tax paid on manpower supply is used in providing construction service then the service receiver is allowed to take credit and discharge his tax liability. In the result, the applicant could not make out a prima facie case for total waiver of pre-deposit of dues adjudged. Keeping in view the fact that the applicant is a co-operative society of local labourers and not pursuing any profit motive, also keeping in view the interest of Revenue, it would be proper to direct the applicant to deposit Rs. 15.00 lakhs in addition to the amount of Rs. 5.00 lakhs already deposited by the applicant which is not disputed by the Revenue. Consequently, the applicant is directed to deposit Rs. 15.00 lakhs (Rupees Fifteen lakhs only) within a period of eight weeks from today and on deposit of the said amount, balance dues adjudged would stand waived and its recovery stayed during the pendency of the appeal. Compliance to be reported on 28-8-2014. Failure to deposit the said amount would result in dismissal of appeal without further notice.

Decision:- Application disposed off.

Comment:-The analogy of the case is that the sub-contractor cannot dispute the service tax payable by them on rendering services under the category of ‘supply of manpower’ on the ground that the principal contractor has discharged service tax. This is for the reason that the credit of Service Tax paid on manpower supply used in providing construction service will be admissible to the principal contractor and as such, there is no double taxation. Accordingly, the stay application was disposed off by ordering pre-deposit of Rs. 15 lakhs.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2577

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