2011 (3) TMI 1261 - AT - Service Tax

Business auxiliary service - the contract entered into between NTPC and NBCC and the contracts entered into between NBCC and the sub-contractors - NBCC has taken the contract for about Rs. 118.00 crores and a sizeable part of the amount has been given to the sub-contractors for the work actually undertaken by them - Held that As the sub-contractors have rendered in their own rights services of site formation and the services have been rendered to M/s. NBCC and paid for by NBCC - Circular dated 23rd August 2007 the practice prevalent was that when main contractor was paying service tax no service tax was being levied on the sub-contractors - not able to agree that the sub-contractors have rendered business auxiliary services to NBCC. Decided in favor of the assessee

Summary

Issues:
1. Tax liability of NBCC for site formation services and business auxiliary services.
2. Tax liability of sub-contractors for business auxiliary services.
3. Clarification on service tax applicability based on circulars.
4. Stay petitions by APR and SAC.
5. Pre-deposit requirement for NBCC.

Analysis:
1. The case involved the tax liability of NBCC for site formation services and business auxiliary services. The National Building Construction Corpn. Ltd. (NBCC) had a contract with M/s. NTPC for site preparation works. The original authority demanded service tax from NBCC for site formation services to NTPC and from APR & SAC for business auxiliary services. NBCC argued that they only rendered site formation services and not business auxiliary services. They also disputed the tax demands for the period in question and claimed to have paid service tax for site formation services.

2. The sub-contractors, APR and SAC, contended that they provided specific services of site formation and not business auxiliary services. They argued that the tax demands were incorrect as they had contracts only with NBCC, not NTPC. They also highlighted the tax practices before circulars were issued, stating that sub-contractors were not required to pay service tax if the main contractor had already paid.

3. The Department argued that NBCC provided management services to sub-contractors, justifying the classification of services as business auxiliary. The Department emphasized the quantum of demand based on information provided by NBCC. The issue of whether the services fell under business auxiliary or site formation was deferred for final hearing, considering the contract values and service charges during the relevant period.

4. The Tribunal analyzed the contracts and services provided by NBCC and sub-contractors. It found that NBCC primarily rendered site formation services and not business auxiliary services. The Tribunal also noted that sub-contractors provided site formation services directly to NBCC, not business auxiliary services. The Tribunal considered the circulars and prevailing tax practices before making its prima facie observations.

5. The Tribunal allowed the stay petitions by APR and SAC unconditionally, waiving the pre-deposit of dues. However, NBCC was directed to deposit a specific amount within a set timeframe. The Tribunal scheduled the final hearing based on the compliance with the pre-deposit order and the disputed service tax amounts involved in the appeals.