whether the respondant is entitled for refund when he has paid the tax as a sub contractor and where main contractor has also paid the tax for the same transaction?

PJ/CASE LAW/2014-15/2480

Case:- COMMISSIONER OF CENTRAL EXCISE, PUNE-III Vs M/s AKRUTI PROJECTS

Citation:- 2014-TIOL-1925-CESTAT-MUM

Brief Facts:-The brief facts of the case are that the assessee-respondent is a service provider and is registered with the Central Excise Department under the category of ‘Commercial or Industrial Construction Service". M/s Devi Constructions Co. Pvt. Ltd. sub-contracted some of their civil work undertaken for their client to the respondent. The respondent claims that both M/s Devi Constructions and the respondent paid Service Tax on the same transaction. The tax was paid as per Notification No. 1/2006 dated 1.3.2006. The amount of tax so paid was Rs.20,34,317/-. The respondent filed a claim for refund of this amount with lower authority as the tax liability being discharged by the main contractor, they as a sub-contractor were not required to pay the tax again. A show-cause notice in January, 2008 was issued to the respondent asking them to show cause as to why their claim should not be rejected as tax was correctly paid by the respondent on the service provided to the main contractor. The lower authority rejected the claim holding that the respondent had not submitted any documentary evidence to show that they were subcontractors of M/s Devi Constructions. The jobs done by the respondent were final and no activity was carried out by the main contractor. The respondent had carried out constructions work at the site of M/s Devi Constructions as a contractor. Being aggrieved by the impugned order, the Revenue is in appeal before this Tribunal. The grounds raised by the Revenue is that the Commissioner (Appeals) have erred in allowing the refund on the ground that the main contractor who had, as per agreement with their clients, undertaken to provide service, were liable to pay tax, and the sub-contractor was under no obligation to pay tax. Hence, the Commissioner (Appeals) has failed to appreciate the law that the Service Tax on Commercial/Industrial Construction Service was imposed w.e.f. 10.9.2004 and has been defined under Section 65(109)(zzq) of the Finance Act, 1994, which defined the ‘taxable service' is a service provided, or to be provided to any person, by any other person, in relation to service to main contractor, is essentially a taxable service provider. The fact that the service provided by such sub-contractor are used by the main service provider for completion of the work, does not in any way alter the fact of providing of taxable service by the sub-contractor and accordingly, the respondent assessee as a sub-contractor is liable to pay Service Tax and the same was correctly paid by the respondent.

Appellant’s Contention:-The grounds raised by the Revenue is that the Commissioner (Appeals) have erred in allowing the refund on the ground that the main contractor who had, as per agreement with their clients, undertaken to provide service, were liable to pay tax, and the sub-contractor was under no obligation to pay tax. Hence, the Commissioner (Appeals) has failed to appreciate the law that the Service Tax on Commercial/Industrial Construction Service was imposed w.e.f. 10.9.2004 and has been defined under Section 65(109)(zzq) of the Finance Act, 1994, which defined the ‘taxable service' is a service provided, or to be provided to any person, by any other person, in relation to service to main contractor, is essentially a taxable service provider. The fact that the service provided by such sub-contractor are used by the main service provider for completion of the work, does not in any way alter the fact of providing of taxable service by the sub-contractor and accordingly, the respondent assessee as a sub-contractor is liable to pay Service Tax and the same was correctly paid by the respondent. The next ground is that the respondent have not recovered Service Tax paid by the main contractor and also if they have not passed on the burden of Service Tax on the customers or any other person, is for the reason that the main contractor M/s Devi Constructions, wants to avail the benefit of exemptions Notification No. 1/2006 dated 1.3.2006, wherein a condition is provided that notification shall not apply in case, ‘where the CENVAT Credit of duty on inputs or capital goods or the CENVAT Credit of Service Tax on input services, used for providing such taxable service, has been availed under the provisions of the Cenvat Credit Rules, 2004. The next ground taken is that the Commissioner (Appeals) has erred in relying on the Trade Notices No. 5/98 and 53/97 and holding that when the main contractor have discharged the Service Tax in respect of the sub-contracted service, the sub-contractor is not liable for the same. The next ground raised is that the learned Commissioner (Appeals) has overlooked the Board's Circular No. 96/7/2008-ST dated 23.8.2007, wherein it was clarified that sub-contractor is essentially a taxable service provider and accordingly, liable to pay Service Tax.

Respondant’s Contention:-The respondent had submitted in their reply to the show-cause notice that the sub-contractor is not required to pay Service Tax when the main contractor pays Service Tax. There were clarifications to this effect from the Board. The only condition was that both the main and sub-contractor should have provided the same service. In their case the same category of service was provided by M/s Devi Constructions and them. No tax paid was reimbursed to them by the main contractor. They had relied on some case laws also and had in their personal hearing submitted that the amount had not been recovered from the customers. C.A.'s certificate was also submitted. They had also contended that their civil contracts were in the nature of works contract which came to be taxed only w.e.f. 1.6.2007.

Reasoning Of Judgment:-Having considered the rival contentions, it is find that the Notification No. 1/2006-ST is in confrontation with the charging section, Section 66 of the Finance Act, 1994 and accordingly the same is not applicable in the facts and circumstances of the case so far as the condition relating to not taking of CENVAT Credit is concerned of the service tax paid by the sub-contractor. Further, the finding of fact recorded by the adjudicating authority having not been challenged by any of the parties, and in view of the categorical finding of fact recorded, I hold the respondent assessee is entitled to refund.

Comment:-It is evident from Section 66 that the charging section does not provide for multi-point taxation rather provides for destination based taxation and accordingly, the tax cannot be collected twice in respect of the same transaction or services.

SUBMITTED BY:-SOMYA JAIN

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PJ/CASE LAW/2014-15/2480

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