Whether sub-contractor liable if main contractor has paid service tax?

PJ/CASE LAW/2014-15/2516

Case:-EAST COAST ENGINEERING COMPANY Vs COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, GUNTUR

Citation:-2014-TIOL-2118-CESTAT-BANG

Brief facts:-Service Tax of Rs. 30,89,893/- with interest has been demanded with imposition of equal penalty on the appellant on the ground that appellant did not pay service tax on ‘Survey and
Map Making Service' rendered by them.

Appellant’s contention:-Learned counsel submitted that it was the claim of the appellant that the main contractor haspaid the entire amount of tax and therefore on the same service and on the same consideration,there was no need for the appellant to pay the tax again. He submits that this submission hasbeen rejected on the ground the amount paid by the main contractor did not tally with theamount paid by the appellants and he submits that this can never tally since the demand ofservice tax is based on receipt of the amount and amounts paid by the main contractor to theappellant and the amounts received by him need not exactly tally with each other and tally occasion wise also. He submits that this aspect has not been taken into account and he alsosubmits that both the appellants and the main contractor are situated in the jurisdiction of thesame range office and the same division and even then the officers have refused to conduct anyverification whatsoever and demand has been confirmed against the appellant. He submits thatthe contract was passed on to the appellant on a back to back basis and therefore the maincontractor had not rendered any service and therefore the procedure followed by them forpayment of the entire tax by the main contractor was sufficient.

Respondent’s contention:- The learned AR contend that procedure requires the appellant to pay tax and main contractor to take credit and thereafter discharge service tax liability. If the appellants choosenot to follow the procedure prescribed under the law, nobody can help them.

Reasoning of judgment:-The Hon’ble Tribunalfind in agreementwith the submission of the learned AR that procedure requires the appellant to pay tax and main contractor to take credit and thereafter discharge service tax liability. If the appellants choosenot to follow the procedure prescribed under the law, nobody can help them, submits thelearned AR. Nevertheless the fact remains that if an assessee makes a claim that the sameservice and the same transaction has already suffered the tax, levy of tax for the second time onthe same transaction without even verifying the correctness of the claim, in their opinion, may notbe sustainable. For the normal period of limitation, in their opinion, the demand would have beendefinitely sustainable since for demand in the normal period, even if there is a mistake, theamount becomes payable. However in the case of extended period, there has to be suppressionof fact or mis-declaration. In this case if an assessee believed in a bona fide manner that he isnot liable to pay service tax and there are sufficient grounds for such plea and such plea is not ablind belief, he cannot be found fault with if the assessee considers that the tax is non-taxable.This would mean that the assessee has assessed his tax as ‘nil'. In this case since the maincontractor paid the tax and show-cause notice has been issued beyond the normal period oflimitation, they consider that in the absence of any evidence to show that the appellant had anintention to evade tax or suppress the facts, tax could not have been demanded again.Suppression of fact is something which is required to be declared in accordance with statute andnot declared. In a self assessment regime, if an assessee correctly assessed the goods accordingto his own assessment and if there is a valid ground for him to take such a view, extendedperiod may not be invokable. Under these circumstances they consider that appellant has madeout a prima facie case for waiver of pre-deposit. Accordingly the requirement of pre-deposit iswaived and stay against recovery is granted for a period of 180 days from the date of this order.

Decision:- Stay application allowed.

Comment:- The analogy of the case is that same service and same consideration cannot not be taxed twice. There is no evidence to show that there was any intention to evade tax or suppress the facts. Accordingly, considering the fact that the main contractor had already paid service tax and extended period of limitation was not invokable, the stay application was allowed.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2516

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