TMI Blog2017 (11) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue to the government - For provision of any output service numerous inputs services are required. For example, a consultant providing consultancy would receives input services in nature of (i) renting of immovable property service (ii) Air Travel services (iii) Business Support Service (iv) Manpower supply service (v) renting a cab services and so on. If the consultant is paying tax on the entire value of service provided by him, then would all services provider listed become exempt from paying service tax as sub-contractor. If the argument of the appellant is accepted then every provision of services to another taxable service provider would not be liable to payment of service. This situation can only lead to chaos. The appellants are involved in providing services to the main contractor which they claimed to be a sub-contract. The appellants are providing services to the main contractor and not the owner of the land. Moreover the nature of services provided by the appellants to the main contractor is not the same as those provided by the main contractor to its client. A perusal of the above circular clearly indicates that the services in respect of which the clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. He argued that in these circumstances, service tax cannot be demanded from the appellants as it would result I double levy of service tax. He particularly relied on the decision of the Tribunal in the case of Akruti Projects - 2015 (37) STR 348 (Tri-Mum) to assert that once the main contractor has paid service tax, the same cannot be demanded from the sub-contractor. 2.1 Ld. Counsel further argued that part of the service was provided within the Special Economic Zone (SEZ) and no service tax can be levied on such services. He argued that this point was not taken before the Commissioner, however this being a legal point can be raised at Tribunal stage. He further argued that the Commissioner has examined only one contract and based on his findings only one contract. He argued that the Commissioner should have examined all contracts individually to come to any findings. He however did not specify as to what is the difference between this contract and others, and how that would be relevant. 2.2 Ld. Counsel further argued that the services provided by them is not erection, commissioning and installation but manpower supply service. He however could not give any evidence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pointed out that failure to disclose the position in conformity with balance sheet in ST-3 return amounts to suppression as has been held in the following decision: a) Reliant Advertising - 2013 (31) STR166 (Tri-Del) b) Vodafone Digilink - 2013 (29) STR 229 (Raj) c) Lakhan Singh - 2016 (46) STR 297 (Tri-Del) 3.2 Ld. AR further argued that revenue neutrality cannot be pleaded at this stage when short levy has been detected during audit or investigation. He further argued that there was no revenue neutrality as the credit of this tax was not available to the main contractor if he availed benefit of notifications 19/2003-ST and 01/2006-ST. 4. We have gone through the rival submissions. 4.1 The first issue that we examine is if there will be a revenue loss to government or this is a revenue neutral situation. The main contractor is involved in Erection Commissioning and Installation service. In respect of this service the tax liability is governed by the notifications 19/2003-ST and 01/2006-ST which read as follows notifications 01/2006-ST. In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20th June, 2003]. Explanation. - For the purposes of this notification, the expression food means a substantial and satisfying meal and the expression catering service shall be construed accordingly. Thus it is apparent if the main contractor was availing of this notification he could not have availed of the credit of the tax paid by the appellant. Thus in those circumstances the situation would not be revenue neutral. Moreover the main contractor has been granted abatement from the value only for the reason that the credit of the duty paid on the inputs and input services (by the sub contractors) has not been allowed, and also for the reason that the sub contractors have already paid duty on the value of inputs and input services. If the appellants contention is accepted it would result in defeating the very purpose of the notification and will also result in loss of revenue to the government. The scheme of Cenvat is designed in such a manner that every service provider is liable to pay service tax. The service receiver, if engaged in provision of taxable service can claim Cenvat Credit of the service. Service tax paid by the input service provider/sub-contractor by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court, Hon ble High Court or this Tribunal or for some other reason that the circulars are modified or superseded. However, the circulars are to be applied only as per law as it exists at that point of time and with reference to the commodity/services. This is true even in case of service tax. In 2007 an initiative was taken by the Board so that circulars in respect of various services were consolidated in one single circular, known as master circular. At that point of time it was also realized that the large number of circulars have lost their relevance long back due to amendment in the law. Accordingly, such circulars were not part of the new master circular or were stated to be withdrawn. At that point, a general clarification as under was issued - 999.03/ 23-8-2007 A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-contractor, service tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work. A sub-contractor is essentially a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the administrative nature to sort out cascading effect on service tax. Perhaps, a better way would have been to issue notification achieving the same objective. Be that it may be, this Tribunal cannot extend the scope of such circulars to other services, particularly which were not in existence at that time. Service tax law has been extended to a large number of services from 2002 onwards and scheme of Cenvat credit was extended to services, no such circular has been issued in respect of any of the services which became taxable in 2002 or afterwards. Even in respect of services which were taxable before 2002, the earlier circulars became redundant in view of the change in law. Learned Advocate's argument that the old circulars were withdrawn only with the issue of Master Circular on 23-8-2007 is not relevant at all, particularly in view of the fact that the service being dealt in the present case is Commercial or industrial construction service which become taxable when the Cenvat credit scheme was already available. The four circulars which were issued in 1997-1998, in respect of four specified services were in any case redundant even in respect of those four services from 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Counsel. It is seen that the decision in the case of Vijay Sharma was largely based on the fact that the credit of service tax paid by sub-contractor would be available to the main contractor. It was also based on the fact that sub-broker is also considered as broker, in so far as the client is concerned. Both these factors are missing, in the instant case. The sub-contractor cannot be treated as contractor and the duty paid by the sub-contractor is not necessarily available as credit to the main contractor. Moreover the appellants in this case are not providing the services directly to the client as the agent of the main contractor. Moreover there is no abatement and no restriction regarding the availability of credit to the main contractor. Thus in those circumstances there was a revenue neutral situation unlike the present case. 4.3 Ld. Counsel relied on the decision of the Tribunal in the case of Akruti Projects (supra ), it is seen that the entire findings of the said decision are reproduced below: 5. Having considered the rival contentions, I find that the Notification No.1/2006-S.T. is in confrontation with the charging section. Section 66 of the Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -contractor in the context of the issue under examination is simply that of an agent of the contractor either from the point of the employer or from the point of view of the rest of the world. Though there are two agreements satisfying the definition of a works contract under the VAT Act. 4.3 The aforesaid order of the Hon ble High Court was challenged by the State of Andhra Pradesh before the Hon ble Supreme Court, wherein at para 17 of the order dated 26-8-2008 reported in 2008-TIOL-158-SC-VA T, the Supreme Court took notice that the issue before it was whether the turnover of the sub-contractor is to be added to the turnover of the main contractor (L T). In other words, the question which the Court was required to answer was as to whether the goods supplied by the sub-contractor occurred in the form of single deemed sale or multiple deemed sales. The Hon ble Supreme Court observed that the issue stands clarified in ruling of the Builders Association of India - 1989 73 STC 370 , wherein it was held that ordinarily unless there is a contract to the contrary in the case of works contract the property in the goods used for construction passes to the owner of the land on whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple finds place in sub-section 7(a) of Section 4 of the said 2005 Act. It is seen that the said decision has been passed with respect to the VAT on works contract. The said decision of the Hon ble Apex Court in the case of Larsen Toubro Ltd. (supra) relies on the decision of the Hon ble Apex Court in the case of Builders Association of India 1989 (73) STC-370 wherein it has been held that ordinarily unless there is a contract to the contrary in the case of works contract, the property in goods used for construction passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building'. The fact in the said case are substantially different. The VAT is levied at the time when the property in goods is passed. In the case of Builders Association of India (supra) the Hon ble Apex Court has observed that in case of works contract when goods are constructed on land belonging to the owner of the land then immediately on such construction, the property of the goods passes to the owner of the land. Thus, when a sub-contractor does construction work on a land, the propriety passes to the owner of the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsulting engineer on the service rendered by them. Similarly, a market research agency would be required to pay service tax on services rendered by it to an advertising agency, even if the advertising agency is also liable to pay service tax on the amount billed to its client for advertising services (which inter alia, includes the amount paid by the advertising agency for such market research services to the market research agency . c) Trade Notice No.1/96-ST dated 31/10/1996 Mumbai Commissionerate: - 6. It has been represented that in many cases the advertising agency gets a documentary or film prepared by an independent film producer on behalf of the client. In such cases, the film producer deals with the advertising agency and the payment to him is also made by the advertising agency and not by the client directly. Ultimately, however the advertising agency charges the client for the amount paid to the film producer. Under these circumstances a question has been raised whether the film producer is also liable to pay service tax on the documentary or film prepared by him in relation to an advertisement. In this connection, it is relevant to note that taxable service is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cellular telephone operators by DOT will be subject to no service tax. Cellular telephone services between two subscribers holding cellular phone and also with persons holding local telephone. While the company charges home net work/air time charges on their subscribers using their network cellular phone facility, additionally they collected land line charges when the subscribers calls other than cellular phone numbers which are routed through the DOT network for which they are provided with junctions. Cellular telephone operators are required to pay to DOT rent charges on junctions in addition to DOT charges collected at specific rate per unit from their customers. Decision: Cellular phone operators are realizing rent and access charges from their subscribers and as such when cellular companies pay service tax on the amounts received by them from their subscribers it includes rent and access charges and as such to charge again service tax on their charges by DOT will amount to double taxation. Board is of the view that no service tax is again chargeable on rent and access charges paid to DOT by cellular phone operators. A perusal of the above circular clearly indica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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