TMI Blog2014 (10) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... take credit of input services vide notification no. 1/2006. In my opinion if law specifically prohibits doing something, the same cannot be circumvented by stopping to pay duty and claiming benefit of circulars which were not issued even in respect of that service and was also prior to the law at the relevant time i.e. introduction of Cenvat credit scheme to services. Appellant had no doubt about the taxability of service and was in fact paying service tax till 28.2.2006 and stopped paying service tax w.e.f. 1.3.2006 due to changes in legal position relating to the main contractor, it is clearly a case of taking law into hands. The notification No. 1/2006 clearly prohibits taking the credit of service tax paid on input services for availing the abatement. By not paying the duty appellant is trying to subvert purpose of restriction imposed in the new notification. Clearly this is a willful act with clear intention to evade payment of duty. The appellant is liable to pay service tax on the taxable services rendered by him in the capacity of a sub-contractor. The appellant's eligibility to the benefits of Notification No. 12/2003-ST and 1/2006-ST shall be examined by the adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sub-contractor need not pay service tax on the value of services rendered by him, provided the appellant proves the payment of service tax by the main contractor. As regards the inclusion of value of materials sold, it was held that the appellant's claim for abatement under notification No.1/2006-ST should be considered. Therefore, the matter was remanded back to the adjudicating authority for de novo consideration. The said decision of the Tribunal was challenged by the Revenue before the hon'ble High Court of Bombay in Central Excise Appeal Nos. 10 and 11 of 2010 and the hon'ble High Court set aside the order of the Tribunal and remanded the matter back to the Tribunal for fresh consideration. On such remand, this Tribunal remitted the matter back to the adjudicating authority for fresh decision as per the High Court's directions vide order A/136/11/CSTB/C.I dated 23/03/2011. 4. In pursuance of the said directions, the Adjudicating authority has passed the impugned order. The adjudicating has held that as per the provisions of Notification No. 12/2003-ST dated 20/06/2003, exemption from tax on the value of goods and materials sold by the service provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er documents in respect of NTPC work. Similarly in respect of the works carried out for Punj Lloyd, the relevant details were submitted vide letters dated 17/11/2006 and 09/03/2007. Thus all the information required for determination of eligibility to exemption under Notification No. 12/2003-ST was available with the department which the adjudicating authority has failed to take into account. If required, the appellant can once again submit the details before the adjudicating authority if opportunity is given. 5.2. As regards the non-payment of service tax as a sub-contractor, the CBEC had issued circulars from time to time with respect to various other services that there is no requirement for payment of service tax by the sub-contractors and the Tribunal also in a number of decisions, namely, BBR India Ltd. [2006 (4) STR 269], Semac (P) Ltd. [2006 (4) STR 475], Rana Udyog (P) Ltd. [2007 (7) STR 526], Oikos [2007 (5) STR 229 (Tri.-Bang)], Foto Flash 2008 (9) STR 462 and Evergreen Suppliers [2008 (9) STR 467] had held that sub-contractor need not pay service tax in case the main contractor had paid the tax. Therefore, the appellant was under the bona fide belief that they were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of which there was no such clarification. Further, the circulars lost relevance after 16/08/2002 when CENVAT credit was extended to service tax whereby it became possible to take CENVAT credit of service tax paid on input services. Therefore, the issue of sub-contractor not paying service tax lost its relevance as main contractor could take CENVAT credit of the same. 6.3. As regards the contention of the appellant that extended period of time could not be invoked in respect of show cause notice dated 29/12/2010 when the first show cause notice on the same issue was issued on 23/03/2007, it is submitted that the first notice dealt with work orders relating to NTPC and Punj Lloyd whereas the second show cause notice dealt with contracts awarded by Hindusthan Steel Works Construction Ltd., Bhola Singh Jaiprakash Construction Ltd., Tata Projects Ltd., and Shankar Narayan Construction Ltd. Thus the two show cause notices were issued in respect of contracts awarded to different parties as and when the same was detected by the department. The appellant had in fact suppressed the information of contracts given by other parties from the department at the time of investigation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tri.LB)]. In the said case, it was held that- The scheme of service tax law suggests that it is a single point tax law without being a multiple taxation legislation. In the absence of any statutory provision to the contrary, providing of service being event of levy, self same service provided shall not be doubly taxable. If service tax is paid by a sub-broker in respect of same taxable service provided by the stock broker, the stock broker is entitled to the credit of the tax so paid on such service if entire chain of identity of sub-broker and stock broker is established and transactions are provided to be one and the same..... This decision was followed by another co-ordinate bench of this Tribunal in Sew Construction Ltd. case [2011(22) STR 666 (Tri. Del)] wherein it was held that - we do not find any provision in the Finance Act, 1994 to grant immunity to the sub-contractor from levy of service tax when undisputedly taxable services were provided by them. . Therefore, the argument that since the main contractor has discharged the service tax and therefore, the sub-contractor need not pay service tax is without any legal basis and is quite contrary to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices. In respect of these services, there were specific circulars of the board clarifying that if the main service provider pays the tax, the subsidiary service provider need not pay tax. Further all these services were brought under the tax net prior to introduction of CENVAT credit scheme to the services sector and the demand for service tax pertained to the period prior to extension of CENVAT credit scheme to the services sector. It was in that context, this Tribunal in the various decisions cited held that the sub-contractor need not pay service tax, if the main contractor has discharged service tax liability in full. In these decisions, this Tribunal did not lay down any general proposition that if the main contractor discharges service tax liability, the sub-contractor need not pay service tax. That is not the fact obtaining in the present appeals before us. The demand for service tax in the present case pertains to the period after April, 2004. By that time CENVAT credit scheme had already been extended to the services sector. Further, the service involved in the present case is commercial or industrial construction service and in respect of this service, no instruction h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable output service. The concept and procedure of such a scheme cannot be rendered otiose or ineffective by wrong or incorrect judicial interpretation. 7.6. The appellant has also raised a point that while confirming the demand in the impugned order, the adjudicating authority has not extended the abatement in value under Notification No.1/2006-ST in as much as the appellant has not availed any CENVAT credit on inputs, capital goods and input services consumed in the rendering of the service. This claim of the appellant needs to be examined and if found admissible, abatement needs to be allowed. If abatement is not permissible, then the appellant would be eligible for CENVAT credit of the excise duty paid on inputs and capital goods and service tax paid on input services in accordance with law. 7.7. The next question for consideration is whether extended period of time could be invoked for confirmation of service tax demand. The argument adduced is that the appellant was under the bona fide belief that they were not liable to pay service tax since the main contractor was discharging service tax. This claim of the appellant is quite hollow and mis-leading. The appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the department had knowledge of the appellant's transactions since 27-3-08, this plea cannot be accepted for the following reason. In Neminath Fabrics case [2010 (256) ELT 369 (Guj)], the hon'ble High Court of Gujarat held that if any of the ingredients for invoking extended period of limitation is present, then extended period of limitation can be invoked for confirmation of demand and knowledge of the department is not relevant. A larger bench of this Tribunal in Union Quality Plastics Ltd. case also held the same view. The relevant extracts from the Neminath fabrics case is reproduced below:- 17. The proviso cannot be read to mean that because there is knowledge the suppression which stands established disappears. Similarly the concept of reasonable period of limitation which is sought to be read into the provision by some of the orders of the Tribunal also cannot be permitted in law when the statute itself has provided for a fixed period of limitation. It is equally well settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation. 18. The Proviso comes into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. Therefore, we uphold the penalties imposed under Section 76 of the Finance Act, 1994 on the appellant. Similarly, penalty under Section 77 is for non-compliance of the statutory provisions of filing of returns. In as much as there is non-compliance, the same is also liable to be upheld. As regards the penalty under section 78, we have already held that the appellant has suppressed facts and therefore, extended period of time has been rightly invoked. If that be so, penalty under section 78 is imposable since it is mandatory. Apex Court decision in Rajasthan Spinning and Weaving Mills [2009(238) ELT 3 (SC)]. However, for the period w.e.f 10-5-2008, only penalty under section 78 is imposable and not that under section 76 in view of the express provisions provided in that respect in the said section 78. However, we observe that penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main contractor. Further the appellant have paid tax as sub-contractor till 28.02.2006. Thereafter w.e.f. 01.03.2006 Notification No. 15/04, was replaced by Notification No. 01/2006, which prohibited availment of CENVAT credit on inputs if abatement of 67% on materials is claimed. Accordingly, as advised, the appellant stopped paying Service Tax as a sub-contractor w.e.f. 01.03.2006, to avoid double taxation. The appellant relied on the beneficial circular(s) and rulings noticed above. As the position was clarified by Revenue vide master circular No. 96/7/2007 dated 23.08.2007, that a sub-contractor is obligated to pay Service Tax, irrespective of whether the main contractor have paid, it is categorically held that the appellant will be liable to pay Service Tax as a sub-contractor, w.e.f. 23.08.2007. 11. On the third issue (c), regarding invocation of extended period of limitation, I agree with the Ld. brother Member (Technical) as I find that returns for several period(s) have been filed after substantial delay of 9 to 15 months. 12. Penalty under Section 76 78 In view of the submissions and contentions of appellant as recorded in paras 19.25, 19.26, 19.27, 19.28 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to service tax. It is also not disputed that the appellants were paying service tax on the same before 1.3.2006. The service tax so paid was availed as credit by the main contractor who after availing the said credit was discharging his duty liability under Notification No. 12/2003-ST. From 1.3.2006 appellants stopped paying the service tax on their activity because in the newly issued notification viz. 1/2006-ST dt. 1.3.2006, the main contractor has become ineligible to avail the credit of services provided by the appellant. There was no change in law as far leviability of service tax on the activity of appellant is concerned. 16. The Learned Advocate for the appellant placed various contention as under: (i) After the different abatement notifications are consolidated under 1/2006, input service credit was also restricted, which appears to be unintentional. The reason for abatement is exclusion of materials value (CBEC Circular 80/20/2004 Dt. 17.09.2004) and only input credit should have been restricted. Even the % abatement remained the same under 1/2006. Once such unreasonable restriction has been placed on availment of cenvat credit on input services, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) The Member (Judicial) has observed that the revenue has clarified vide master circular no. 96/7/2007 dated 23/08/2007 that a sub-contractor is liable to pay Service Tax even if main contractor has paid service tax. Member (Judicial) has held that appellant will be liable to pay Service Tax as a sub-contractor only w.e.f 23/08/2007. In this regard, it is submitted that CBEC has issued four circulars dated 6/6/97, 2/7/97, 11/7/97 and 7/10/98. These circulars were with regard to individual services namely CHA service, Rent-a-cab operator service, consulting engineer service and interior decorator/architect service respectively. These were not general circulars pertaining to all the services. These cannot be considered as general circulars as In that case, CBEC would not have issued circulars in a gap of 26 days. (ii) Further, these circulars lost their relevance after 16/08/02 when cenvat credit was extended to service tax and it became permissible to take cenvat credit of service tax paid on input services. Hence the issue of sub-contractor not paying service tax lost its relevance as main contractor could take cenvat credit of the same. The appellant has stated that fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax, till the issue was clarified on23/08/2007 and hence upheld the waiver of penalties by lower authorities. This contention of appellant is factually wrong as member (Tech) had never held that service tax was not payable. In fact, that was not even an issue before him. The only issue was imposition of penalty and the same was not imposed on the ground that there was no intention to evade Service Tax. In the present case the appellant was paying Service Tax before 1/3/06 and then, stopped paying Service Tax as cenvat credit of input services was not available to main contractor after 1/03/06 if he availed the benefit of abatement under notification no. 1/2006. Thus, the decision to not pay Service Tax was a conscious decision on the part of the appellant and not a bonafide mistake. II) Penalty Under Section 76 Section 78 (vii) Member (Judicial) has set aside the penalty under Section 76 78 only on the ground that appellant had paid tax with interest before issue of Show Cause. This is factually wrong as in first SCN against the Service Tax demand of ₹ 63,28,217/- an amount of ₹ 16,26,300/- only was paid. Similarly, in second SCN, against the demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided. At times circulars are also used by the board to take care some administrative difficulties in the administration of tax as particular way of implementation may cause undue hardship. Service tax was introduced in 1994 on three services, in 1996 another three services were added and in 1997 additional three services were brought under the service tax net. At that point of time service tax was not covered by Cenvat credit system i.e. credit of input services or inputs was not available while providing any other output service. Around 2002, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is also a service provider, and is liable to pay tax. 19. I also note that in the present case the appellant had no doubt about the provisions of law and the fact that his activity was chargeable to service tax. This is evident from the fact that the appellant was paying service tax before 1.3.2006. From 1.3.2006 the reason for stopping to make payment is only that the main contractor was specifically made ineligible to take credit of input services vide notification no. 1/2006. In my opinion if law specifically prohibits doing something, the same cannot be circumvented by stopping to pay duty and claiming benefit of circulars which were not issued even in respect of that service and was also prior to the law at the relevant time i.e. introduction of Cenvat credit scheme to services. Learned Advocate has stated that there is no rationale to restrict the credit of input services in 2006. The Learned Advocate has also stated that it was unintentional. I am unable to subscribe to this argument. If at all, restriction on input service credit was unintentional, the same would have been amended within a gap of few weeks or months. The fact remains, the said restriction has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disputed duty is yet to be paid. Further keeping in view the fact that appellant had no doubt about the taxability of service and was in fact paying service tax till 28.2.2006 and stopped paying service tax w.e.f. 1.3.2006 due to changes in legal position relating to the main contractor, it is clearly a case of taking law into hands. The notification No. 1/2006 clearly prohibits taking the credit of service tax paid on input services for availing the abatement. By not paying the duty appellant is trying to subvert purpose of restriction imposed in the new notification. Clearly this is a willful act with clear intention to evade payment of duty. Under the facts and circumstances of the case penalty under Section 76 78 would be liable to imposed as held by Member (Technical) relying on the decision of the Hon'ble High Court of Kerala in the case of Krishna Paduval - 2006 (1) STR 185 (Ker) and the Hon'ble Apex Court in the case of Chairman SEBI Vs. Shriram Mutual Fund Another - 2006-TIOL-72-SEBI. I therefore agree with Learned Member (Technical) that appellant is liable to penalty under the provisions of Section 76 78 of the Finance Act. (Pronounced in Court on 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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