TMI Blog2019 (6) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to discharge the Service Tax liability in respect of a taxable service when the main contractor has paid Service Tax on the gross amount, more particularly when there is no provision granting exemption to him from payment of Service Tax. It is not in dispute that a sub-contractor renders a taxable service to a main contractor. Section 68 of the Act provides that every person, which would include a sub-contractor, providing taxable service to any person shall pay Service Tax at the rate specified. Therefore, in the absence of any exemption granted, a sub-contractor has to discharge the tax liability. The service recipient i.e. the main contractor can, however, avail the benefit of the provisions of the CENVAT Rules. When such a mechanism has been provided under the Act and the Rules framed thereunder, there is no reason as to why a sub-contractor should not pay Service Tax merely because the main contractor has discharged the tax liability - there can be no possibility of double taxation because the CENVAT Rules allow a provider of output service to take credit of the Service Tax paid at the preceding stage. It would also be useful to refer to a larger Bench decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p)) under the Finance Act, 1944 (hereinafter referred to as the Act'). During the period 01 October, 2007 to 31 March, 2012, the Respondent was engaged in providing Works Contract service as a sub-contractor to the main contractors and details of the contracts are as follows : S. No. Main Contractor Work Order date Nature of Work Done by sub-contractor 1. M/s S. S. Enterprises 08 January, 2007 Supply and application of Primer and Paints on Tanks and Piping Works Contract Service 2. M/s Vijay Nirman Co. Pvt. Ltd. 04 April, 2009 Blasting and Painting Works Works Contract Service 3. M/s D.K. Industries 20 May, 2008 Grill Blasting and Painting Works Contract Service 3. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to adhere to the provisions of the CENVAT Credit Scheme for discharge of Service Tax liability. This was, according to the Commissioner, for the reason that at every stage under the CENVAT Scheme the provision of service is taxed and would not lead to double taxation as the credit of the tax earlier paid would be available at a subsequent stage and this would also ensure correct payment of tax to the government exchequer. The relevant observations of the Commissioner in the order are reproduced below : 20. In this connection, I observed that it is a fact that no tax can be levied on single activity twice as per the statutory provisions of service tax law. Section 66 of the Act, speaks levy of service tax on the taxable services mentioned in Section 65 of the Act ibid. However, in case of service provider liability of paying service tax has cast upon on them whereas the service tax is ultimately collected from the service receiver itself. This all has been done by the legislature to safeguard the government revenue in case the service recipient does not make payment of service tax on the services received by them. In the instant case, the service receivers have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available at subsequent stage and also ensures the correct payment to the government exchequer. Further, the department's clarifications issued vide Circular No. 96/7/2007-ST dated 23.08.2007 clearly supports my above view. Therefore, I am of considered opinion that the noticee has miserably failed to discharge their procedure liability laid down under the provisions of Finance Act, 1994, as amended read with Service Tax Rules made thereunder, in as much as it is not open to any assessee to determine the stage of discharge of their due Service Tax liability particularly when the same has been clearly provided under the relevant provisions itself. Further, such procedural lapse could have lead to tax evasion which is admittedly not there as per the documents available on record and also the fact of discharge of due Service Tax by the main contractor instead of sub-contractor is not disputed in the SCN itself. Although, I am of the view that the noticee should be punished very heavily in the present case but I am constrained to impose the maximum penalty which I am empowered to impose under the provisions of Section 77 of the Act. 24. Accordingly, I pass the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Shri Anil Sood, learned Counsel both appearing for the sub-contractors, however, contended that imposition of any Service Tax liability on a sub-contractor will amount to double taxation, which would not only be against the spirit of Service Tax Law, but would also be violative of the provisions of Article 265 of the Constitution since it would result in demand of Service Tax without any authority of law. The submission, therefore, that was advanced was that in a situation when the main contractor has discharged Service Tax liability, there will be no revenue loss to the Department if the sub-contractor does not pay the Service Tax and in any view of the matter recovery of tax from the sub-contractor shall give rise to a revenue neutrality situation. Reliance was placed by learned Counsel on certain decisions, to which we shall refer to at the appropriate stage, to contend that Service Tax imposed upon a sub-contractor is liable to be set aside on grounds of 'Double Taxation' and 'Revenue Neutrality'. 7. We have considered the submissions advanced by the learned Authorised Representative of the Department and the learned Chartered Accountant and lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des that there shall be levied a tax (hereinafter referred to as the 'Service Tax') @ 12% of the value of taxable services of various sub-clauses of clause (105) of section 65 and collected in such a manner as may be prescribed. Section 68 of the Act provides that every person providing taxable service to any person shall pay Service Tax at the rate specified in section 66 in such a manner and within such a period as may be prescribed. Section 94 of the Act deals with power to make Rules. Sub-section (1) provides that the Central Government may, by Notification in the official gazette, make Rules for carrying out the provisions of Chapter V of the Act. Sub-section (2)(a) provides that such Rules may provide for collection and recovery of Service Tax under sections 66 and 68 of the Act. In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 and section 94 of the Act and in supersession of the CENVAT Credit Rules, 2002 and Service Tax Credit Rules, 2002, the Central Government framed the CENVAT Credit Rules, 2004. It is, therefore, clear that every person (which would include a sub-contractor) providing taxable service to any person (which will incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax, number of clarifications had been issued, but it had become necessary to take a comprehensive review of all the clarifications keeping in view the changes that had been made in the statutory provisions, judicial pronouncements and other relevant factors. The relevant portion of the Master Circular, insofar as it relates to sub-contractors, is reproduced below : 999.03 /23.08.07 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 taxable service provider. The fact that services provided by such sub-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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude a sub-contractor, providing taxable service to any person shall pay Service Tax at the rate specified. Therefore, in the absence of any exemption granted, a sub-contractor has to discharge the tax liability. The service recipient i.e. the main contractor can, however, avail the benefit of the provisions of the CENVAT Rules. When such a mechanism has been provided under the Act and the Rules framed thereunder, there is no reason as to why a sub-contractor should not pay Service Tax merely because the main contractor has discharged the tax liability. As noticed above, there can be no possibility of double taxation because the CENVAT Rules allow a provider of output service to take credit of the Service Tax paid at the preceding stage. 16. It is in this light that the main contention of learned Counsel for the Respondent that if a sub-contractor is required to pay Service Tax when the main contractor has actually discharged Service Tax liability, it would amount to 'Double Taxation', has to be examined. For this contention, reliance has been placed by the learned Counsel for the Respondent on the following decisions of this Tribunal : (i) Ur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-2007 as well as dated 7-10-1998, if the principal had not paid the Service Tax then the same can be charged. If the Service Tax has already been paid by the principal, then the same cannot be demanded again. 19. M/s Dhaneshra Engineering Works followed the aforesaid decision in BCC Developers and Promoters Pvt. Ltd. 20. In M/s Edac Engg. Ltd., the Division Bench, after placing reliance upon the decision of the Tribunal in Urvi Construction, observed : 6.2 We are therefore of the considered opinion that these case laws are distinguishable from the decision taken by this very Bench in the case of the present appellants Edac Engineering Ltd. in Final order dated 19.12.2016. We also find that the very same Board's Circular No. 97/8/2007-ST dated 23.08.2007, relied upon by the Ld. AR has been taken note of by the Tribunal in Urvi Construction (supra)). This being so, we have no hesitation in ruling that when service tax has been paid by the main contractor, charging the sub-contractor again will amount to taxing the same service twice. In the circumstances, the issue at hand also requires to be remanded to the adjudicating authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-contractors per se are not liable to service tax even if they rendered taxable service. ...... [emphasis supplied] 24. The same view was taken by the Division Bench of the Tribunal in CCE ST, Raipur vs. M/s J.K. Transport, reported in 2017 (9) TMI 993 CESTAT New Delhi. The relevant paragraph is reproduced below : 5. We find that the CBEC vide Circular dated 23.08.2007 has clarified that the services provided by the sub-contractor is a taxable service, even if the same is used for completion of the work by the main service provider. Thus, for providing the taxable service, the sub-contractor is liable for payment of service tax on provision of such service....... 25. Similar views were taken by the Tribunal in (i) Max Logistics Ltd. v. Commissioner of Central Excise, Raipur, reported in 2017 (47) STR 41 (Tri.-Del.); (ii) Hargovind Electric Decorators v. Commissioner of Central Excise, Jaipur-I, reported in 2016 (43) STR 619 (Tri.-Del.); and (iii) Sew Construction Ltd. v. Commissioner of Central Excise, Raipur, reported in 2011 (22) STR 666 (Tri.-Del.). 26. At this stage, it would also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that period. 27. The Commissioner did express in the impugned order that under the CENVAT Scheme every stage of provision of service is required to be taxed and if a sub-contractor discharges the Service Tax liability, it will not result in double taxable even if the main contractor discharges the Service Tax liability because the credit of the earlier tax paid is available at a subsequent stage, but it is because of the decision of the Tribunal in Urvi Construction, that the Commissioner held that double taxation would result if a sub-contractor is also required to discharge Service Tax liability when the main contractor has discharged the entire liability. 28. Learned Counsel for the Respondent has, however, relied upon the decision of the Supreme Court in Larsen and Toubro Ltd. v. Additional Deputy Commissioner of Commercial Taxes and Anr.,reported in 2016-TIOL-155-SC- VAT. In this case, the contracts which were secured by the Appellant therein were works contract and a part thereof was assigned to the sub-contractor who had submitted returns and paid taxes for the execution of the works contract. During the course of the assessment, the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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