No Service Tax Liability in absence of Service Receiver and Service Provider Relationship: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that there is no service tax liability in absence of service receiver and service provider relationship.

Tripura State Cooperative Bank Ltd, Agartala (TSCBL), the appellant is registered under banking and financial services awarded contract for construction of a multi-storied building for the bank purpose to Tripura Housing and Construction Board, Agartala (THCB).

The appellant submitted that THCB further awarded and has subcontracted the construction of the building to Dipak Paul, for a value of Rs.4 crores. The appellant was called upon to pay the balance service tax amounting to Rs.8 lakhs under Section 73(1) of the Finance Act.

The Commissioner (Appeals) fastened the balance liability on the appellants, on the plea that upon completion of the construction of the building M/s THCB had handed over the building to the appellants who upon getting possession of the said building released all funds due as per contract to THCB, towards the construction of their office building, the appellant fell into the bracket of being the end user/beneficiary/ultimate recipient of the service, and therefore are required to pay the balance 50% of service tax as recipient of service in terms of Notification no. 30/2012 ST. dated 20/06/2012.

The Single Member Bench of Rajeev Tandon, Technical Member observed that “The mere fact that the appellant are making use of the said building and have moved their office into the same is not the test for the delivery of the service. The end user status/ultimate recipient of service test cannot therefore be interpreted to fix TSCBL as the service recipient directly from M/s Dipak Paul.”

The Bench concluded by noting that “No show cause notice therefore merits issuance to the appellant herein as they are not recipient of service directly from M/s Dipak Paul. As there exist, no relationship between TSCBL and M/s Dipak Paul as a service receiver and a service provider for the impugned works order.”

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