2010 (11) TMI 312 - AT - Service Tax

Claim of refund - Double taxation - The work order obtained by assessee from Client was further placed on to sub-contractors and the actual construction services were provided by the sub-contractors who have paid service tax on the same - Such service tax paid by the sub-contractors stands passed on to the present appellant - As such service tax having been paid twice in respect of the same services the present appellant is entitled to refund of tax paid by the sub-contractors - The plea of the appellant rejected by Commissioner (Appeals) on the ground that there is no general principle that there can be no double taxation in the matter of indirect taxes - Impugned order observed that the appellant was at liberty to avail credit and not avail exemption Notification 01/2006 . Held that the service in the present case stands provided by the sub-contractor through the main contractor i.e. appellant - It stands clarified by the Board also that there cannot be double taxation in cases where services are rendered by a person through another person to the ultimate consumer as long as the main person who has the contract with the customer is paying the service tax on the gross amount - Hence set aside the impugned order and remand the matter to original adjudicating authority to verify the appellant s claim of refund and to pass a fresh order

Summary

Issues:
Claim of refund of service tax paid by sub-contractors, rejection of refund claim by original adjudicating authority, appeal before Commissioner (Appeals) challenging rejection on grounds of double taxation, interpretation of exemption notification No. 01/2006, applicability of service tax on sub-contractor services, principle of double taxation in indirect taxes, reliance on tribunal decisions, remand for re-examination of refund claim.

Detailed Analysis:

1. Claim of Refund of Service Tax Paid by Sub-Contractors:
The appellant, a contractor providing construction services, filed a claim of refund amounting to Rs. 19,15,755/- for service tax paid by sub-contractors, contending that the tax was paid under mistake and that the tax burden was borne by them. The appellant argued that recovering tax from both the appellant and sub-contractors would lead to double recovery and double taxation.

2. Rejection of Refund Claim by Original Adjudicating Authority:
The original adjudicating authority rejected the refund claim, stating that the services provided by sub-contractors were input services for the main contractor, and the tax paid by sub-contractors was correct without any mistake.

3. Appeal Before Commissioner (Appeals) - Grounds of Double Taxation:
The appellant appealed before the Commissioner (Appeals), arguing against the rejection of the refund claim. They contended that sub-contractors wrongly paid service tax, passing on the burden to the main contractor. The appellant relied on tribunal decisions and Supreme Court rulings to support the claim that the same service cannot be taxed twice, emphasizing that service tax was paid twice for the same services.

4. Interpretation of Exemption Notification No. 01/2006 and Principle of Double Taxation:
The Commissioner (Appeals) rejected the appellant's plea, stating that there is no general principle against double taxation in indirect taxes. He highlighted that service tax paid at one stage could be availed as credit by the contractor for payment at another stage, suggesting that the appellant could utilize the credit instead of seeking a refund.

5. Applicability of Service Tax on Sub-Contractor Services and Tribunal Decisions:
The Tribunal observed a fallacy in the Commissioner's reasoning, emphasizing that the service provided by the sub-contractor through the main contractor should not be taxed twice. The Tribunal referenced circulars and various tribunal decisions to support the position that double taxation should not occur when services are rendered through another person to the ultimate consumer.

6. Remand for Re-Examination of Refund Claim:
The Tribunal set aside the Commissioner's order, remanding the matter to the original adjudicating authority to reexamine the appellant's claim of refund in light of the established principles and tribunal decisions. The lower authorities were directed to follow the legal precedents and examine the factual position before making a fresh decision on the refund claim.