Demanding Tax which has already been paid by Service Recipient would lead to Double Taxation: CESTAT [Read Order]

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) held that demanding tax which has already been paid by service recipient would lead to double taxation. The bench found  that the appellant assesee was under the bonafide belief that no service tax was payable as same is being paid by the service recipient UPRNN. 

`Shri Ballar Singh, the Appellant challenged  the impugned order-in-appeal confirming the demand of service tax of Rs. 15,94,447/- for the period from 2016-17 & 2017-18 (upto June). The Appellant was engaged by U P Rajkiya Nirman Nigam Ltd, (UPRNN) for waterproofing work on the roof of Govt. buildings and structures. The appellant was issued a Show Cause Notice demanding service tax of Rs. 31,62,187/- which was adjudicated by the Assistant Commissioner, Central Excise, Lucknow who dropped the demand of Rs. 15,94,447/- and confirmed the demand of Rs. 9,98,971/-.  

Both the Revenue and the Appellant filed Appeals before the Commissioner ( Appeals ) against Rs. 15,94,447/- and Rs. 9,98,971/- respectively. The Commissioner ( Appeals ) has passed a common order for both the Appeals. The Revenue has challenged the order of the Assistant Commissioner on the ground that the Appellant as sub-contractor has to discharge his service tax liability on taxable service rendered by him. The Commissioner (Appeals) has held that Adjudicating Authority has erred in dropping the demand of Rs. 15,94,447/- on the taxable value of Rs. 1,06,29,648/- and he thus confirmed the amount. The Respondent has challenged the said grounds of the Appellant by stating that demanding tax which has already been paid by the service recipient from them would lead to double taxation and the same is not permitted under law of land.

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Counsel appearing on behalf of the Appellant assessee submitted that the Appellant have undertaken water proofing work which is ‘Works Contract Service’ executed along with supply of goods such as bricks, mortar and cement etc. The work orders show that they have executed composite service in respect of water proofing work and has not paid service tax on the amount received by him from the service recipient, U P Rajkiya Nirman Nigam Ltd. (UPRNN) under the bonafide belief that no Service Tax was payable as same is being paid by the Service recipient UPRNN. 

The Adjudicating authority has dropped the demand of Rs. 15,94,447/- on taxable value of Rs. 1,06,29,648/- holding that the Principal Contractor, UPRNN has already discharged the tax liability on the entire amount including that which has been reimbursed to the Appellant. He also referred to the letter dt. 06.08.2021 issued by the Additional Project Manager of UPRNN addressed to the Principal Commissioner, Lucknow Informing that Service Tax liability in case of Appellant has been discharged by them. 

Counsel also submitted that during the relevant period the issue of tax liability with respect to the tax payment made by the Principal Contractor on behalf of the sub-contractor was not settled and also quoted the orders of the Tribunal under which they have held that the payment made by the Principal Contractor on behalf the sub-contractor shall be treated as payment made by the sub-contractor.

On examination of letters/certificate, the bench found that the UPRNN is main contractor and liable to pay the service tax on entire work Le construction of building and water proofing work Water proofing work is only a part of the construction of building Hernice UPRNN has deposited the service tax on entire consolidated work e construction of building including water proofing work and issued the certificate to this effect.

 UPRNN has deposited consolidated service tax. The party has also produced copies of the work orders issued by different units of M/s UPRNN Ltd. located at Ambedkar nagar, Mahoba, Balrampur Hospital during the relevant period allotting them water proofing work' and also submitted the copies of the certificates issued by M/s UPRNN Ltd units located at certifying that the party had carried out the said work at different sites falling under the jurisdictions of the respective units during the relevant period. It is also certified that the respective units of M/s UPRNN Lid had discharged Service tax on behalf of the party pertaining to the relevant period and there is no Service tax liability left with respect to the party.

The Govt. of Uttar Pradesh has awarded water proofing work of Govt. buildings to M/S UPRNN Ltd who in turn sub contracted the same to the party The principal contractor, MIS UPRNN Lid has already discharged tax liability on the entire value of services including that which has been sub contracted to the party The party has produced documentary evidence in this regard as referred above in view of above facts, the party would not be liable for any further payment of service lax on the value of services on water proofing work which has already suffered service tax. Further payment of service tax on the same value of services relating to the same set of services has not been any legislative intention under Finance Act 1994. 

 The Principal Commissioner noted that the assessee in the ST-3 Returns had disclosed the taxable income and also disclosed the exempted services for the relevant period and therefore, the Department could not urge that there was suppression of facts by the assessee with an intent to evade payment of service tax.

A single bench of P.K. Choudhary, Member (Judicial) observed that at the relevant time there were conflicting decisions of the Tribunal regarding payment of service tax by a sub-contractor or a sub-consultant and it is only when the Larger Bench decided the issue on May 23, 2019 that it was settled that a sub-contractor would have to discharge the service tax liability even if the main contractor had discharged the service tax liability.

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