2023 (6) TMI 847 - CESTAT AHMEDABAD

Levy of Service Tax - liability of sub-contractor when the main contractor discharged the liability on the full contract value - invocation of extended period of limitation - revenue neutrality - HELD THAT:- There cannot be any malafide in the facts of the present case for the reason that the main contractor discharged the entire service tax liability on the total value of the contract which includes the value of the service provided by the sub-contractor also. If the appellant being a sub-contractor would have discharged the service tax liability, then to that extent the liability of service tax on the main contractor would have reduced therefore, it is clearly a case of Revenue neutral.

Moreover, on this issue the board had issued Circular No. 23/3/97-ST dated 13.10.1997, TRU letter F.No. 341/18/2004-TRU (Pt.) dated 17.12.2004 whereby the Board had clarified that when the main contractor has discharged the service tax on the total value of the contract, the sub-contractor need not to pay service tax. However, subsequently the board has reversed their view and by Circular No. 96/7/2007-ST dated 23.08.2007 clarified that sub-contractor is required to pay service tax.

Besides this contradictory Circular, the matter was also under litigation before various forums and finally the Larger Bench of the Tribunal in the case of Melange Developers Pvt. Limited [2019 (6) TMI 518 - CESTAT NEW DELHI] held that sub-contractor is required to pay service tax. The said judgment was delivered in 2020. Accordingly, the appellant had bonafide belief that there is no liability to pay service tax being a sub-contractor.

The demand though on merit is sustainable but it is clearly hit by limitation and hence not sustainable - Appeal allowed.