CESTAT Quashes Penalty Imposed for Non Payment of Service Tax on Commercial or Industrial Construction Service on ground of Barred by Limitation [Read Order]

The Chandigarh bench of the Custom, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed for the non-payment of service tax on the commercial or industrial construction service on the ground of barred by limitation. 

Megh Raj Bansal, the appellant assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand of service tax with equivalent penalty under section 78 and penalty under section 76 along with interest under section 75 of the Finance Act, 1994. 

Bipin Garg and Jwaria Kainaat, the counsels for the assessee contended that the trade notices issued by the department were not liable to pay service tax and the letters received from the main contractor showed that the service tax had been paid by the main contractor on the activity undertaken by the subcontractor in pursuance of the contract. 

It was further submitted that impugned order was not sustainable in law as the same had been passed without properly appreciating the facts and the law and binding judicial precedents. 

Further stated that being a sub-contractor was not liable to pay service tax when the main contractor had paid the service tax on the entire work. 

Rajeev Gupta and Narinder Singh, the counsels for the revenue relied on the decisions made by the lower authorities and contended that even if the main contractor has discharged the service tax on the ‘Commercial or Industrial Construction Service’. 

It was also submitted that the assessee being the sub-contractor was liable to pay service tax because the assessee was providing the services to the main contractor, and the consideration received by the assessee from the main contractor was the consideration received for the services provided to the main contractor. 

The bench observed that being a sub-contractor was liable to pay service tax on ‘Commercial or Industrial Construction Service’, but the extended period cannot be invoked to demand service tax from the assessee and in the present case the entire demand was barred by limitation. 

The two-member bench comprising S. S. Garg (Judicial) and P. Anjani Kumar (Technical) quashed the order passed by the Commissioner while allowing the appeal filed by the assessee. 

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