No service Tax Leviable on Work done in Capacity of Subcontractor: CESTAT [Read Order]

The Ahmedabad bench of Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) has held that service tax is not leviable on work done in the capacity of subcontractor. It was argued that the majority of demand has been confirmed for the work done under the capacity of a sub-contractor since the same would be tantamount to double taxation, therefore no demand can be sustained.

Tejal Construction, the appellant is inter alia engaged in providing services under the category of (1) Manpower Recruitment or Supply Agency Service; (2) Supply of Tangible Goods Services; (3) Works Contract Services; (4) Commercial or Industrial Construction Services and (5) Business Auxiliary Service. During the period of 2008-09 to 2012-13, the Appellant entered into various contracts with parties like M/s Dharti Dredging and Infrastructure Ltd. (M/s DDIL), and M/s Larsen & Toubro Ltd.

(M/s L&T), M/s Essar Bulk Terminal Ltd. (M/s EBTL), M/s Essar Projects (India) Ltd. (M/S EPIL), M/s Reliance Industries Ltd. (M/s RIL) etc. for providing the aforesaid services. An audit was conducted by the officers of the Department wherein it was noticed that the Appellant was not regular in payment of service tax and filing of service tax returns. On detailed scrutiny of the seized documents, the Department noticed that the Appellant had not discharged its entire service tax dues during the period of 2008-09 to 2012-13. 

A Show Cause Notice has proposed to raise demand under the various categories of Site Formation and Clearance, Excavation and Earthmoving and demolition services, Supply of Tangible goods, Commercial and Industrial Construction Services, Dredging Services, Business Auxiliary Services etc. for various activities carried out by the Appellant during the period under consideration.

However, the Show Cause Notice and adjudicating authority have failed to establish and provide the Appellant with the details and or explanation regarding what amount has been included and how it has been classified under a particular category even though this issue was brought to the notice of the adjudicating authority.

It was argued that a sub-contractor is not liable to pay service tax; it is the main contractor that is liable to pay service tax if applicable or payable. It was argued that the majority of demand has been confirmed for the work done under the capacity of a sub-contractor since the same would be tantamount to double taxation, therefore no demand can be sustained.

A two-member bench comprising Mr Ramesh Nair, Member ( Judicial ) and Mr C L Mahar, Member ( Technical )  found that the appellant has submitted that for computation of demand service category-wise demand was not given in the adjudication order. The Tribunal viewed that at least before 01.07.2012, the correct classification of services is are must to demand the service tax. Therefore, the adjudication order is lacking with regard to the service-wise bifurcation of the demand which needs to be done.

In view of the deficiency in the adjudication order, the CESTAT remitted the entire matter to reconsider the detailed submission of the appellant.

To Read the full text of the Order CLICK HERE

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