ST - Services provided by person in his capacity as sub-contractor is not liable to service tax - opinion of Third Member in Sunil Hi-tech Engineers is per incuriam - respondent assessee entitled to refund - Revenue's appeal dismissed: CESTAT
By TIOL News Service
MUMBAI, OCT 07, 2014: THIS is a Revenue appeal against the order passed by the Commissioner(A), Pune-III.
The respondent is a registered service provider 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 as per Notification No. 1/2006 dated 1.3.2006. The amount of tax so paid was Rs.20.34 lakhs.
Subsequently, they filed a refund claim on the ground that since the tax liability had been discharged by the main contractor, they being a sub-contractor were not required to pay the tax again.
The lower authority rejected the claim holding that the respondent had not submitted any documentary evidence to show that they were sub-contractors of M/s Devi Constructions; that the jobs done by the respondent were final and no activity was carried out by the main contractor; that the respondent had carried out construction work at the site of M/s Devi Constructions as a contractor.
As mentioned, the lower appellate authority allowed the appeal of the respondent and hence the department is in appeal before the CESTAT.
Inter-alia the AR relied upon the Majority decision of the Tribunal in the case of Sunil Hi-tech Engineers Ltd. vs. Commissioner of Central Excise, Nagpur - 2014-TIOL-541-CESTAT-MUM wherein it is held that the sub-contractor is liable to pay Service Tax on services rendered by him and prayed that the Revenue appeal be allowed.
The respondent submitted that it was evident from a plain reading of 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. Reliance is also placed on the following decisions in support of their stand-
+ All India Tax Federation vs. Union of India - 2007-TIOL-149-SC-ST
+ Viral Builders vs. Commissioner of Central Excise, - 2010-TIOL-1575-CESTAT-AHM
+ Larsen & Toubro Ltd. vs. State of Andhra Pradesh - 2006-TIOL-327-HC-HYD-VAT, - 2008-TIOL-158-SC-VAT
+ JAC Air Services Pvt. Ltd. vs. Commissioner of Service Tax, Delhi - 2008-TIOL-839-CESTAT-DEL
It is further submitted that service transaction as well as sale transaction is only one sale/service and, therefore, it can be held accordingly that the Service Tax cannot be collected by Revenue from the main contractor and the sub-contractor. It is further argued that the Circular 96/7/2008-ST dated 23.8.2007 cannot override the provisions of the charging section and the restriction provided (as to CENVAT) under Notification No. 1/2006, stated that the denial of credit to be taken by the service provider as the main contractor, of the Service Tax paid by its sub-contractor is against the charging section and accordingly, should be held to be unenforceable in the facts and circumstances.
The Single Member Bench observed -
"5. Having considered the rival contentions, I find that the Notification No.1/2006-ST is in confrontation with the charging section, Section 66 of the Finance Act, 1994 and accordingly I hold 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, I notice that 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 that the respondent assessee is entitled to refund and accordingly, the appeal of the Revenue is dismissed.
5.1 In view of the ruling of the Hon'ble Apex Court in the case of L&T Ltd. (supra), I hold that opinion of the third member as rendered in the case of Sunil Hi-tech Engineers Ltd. (supra) by this Tribunal is not binding and held per incuriam as the same is directly in the teeth of the ruling of the Apex Court and is passed without taking notice of the aforementioned ruling of the Hon'ble Supreme Court."
(See 2014-TIOL-1925-CESTAT-MUM)
