The Chandigarh bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that subcontractors were liable to pay service tax on erection, commissioning and installation service and upheld the demand of Service Tax on a normal period.
M/s Vishal Engineering Company, the appellant is engaged in providing the taxable services of ‘Erection, Commissioning and Installation’ falling under clause (zzd) of Sub Section 105 of Section 65 of the Finance Act, 1994 which are taxable in terms of Section 66 of the Act, 1994.
It was gathered by the department that the appellant has provided the aforesaid taxable services but did not pay the service tax on the gross amount received instead of rendering the services. The proprietor of the appellant appeared before the Department and submitted copies of TDS certificates for the financial year 2005-2006 to 2007-08 and also made his statement.
The department issued the show cause notice alleging the non-payment of service tax on the taxable service of ‘Erection, Commissioning and Installation’ provided by the appellant.
The appellant submitted that he being a sub-contractor is not liable to pay service tax when the main contractor has paid the service tax on the entire work. The appellant has enclosed copies of letters from the main contractors wherein it has been certified that the value of sub-contracts awarded to the appellant form part of its billing to its customer on which service tax has been paid.
He further submitted that the demand in the show cause notice is time-barred as an extended period of limitation cannot be invoked against the appellant as the appellant was under the bona-fied belief that no service tax was payable by it in view of the clarification issued by the Department itself that a sub-contractor is not liable to pay service tax when the main contractor has paid the service tax on the entire amount.
A two-member bench comprising Mr S S Garg, Member (Judicial)and Mr P Anjani Kumar, Member (Technical) observed that “the period of dispute is from October 2004 to March 2009 and as per the appellant the demand for the period April 2004 to September 2008 amounting to Rs. 6019732/- is beyond limitation and is not sustainable and the demand for the normal period from October 2008 to March 2009 amounting to Rs. 11,53,446/- can be upheld. Hence to compute the demand of service tax for the normal period along with interest, we remand the matter to the original authority with the direction to do this exercise within a period of two months after receiving the certified copy of this order.”
The bench held that a penalty cannot be imposed as there was no intention to evade payment of service tax. The CESTAT partly allowed the appeal and remanded back to the original authority for determining the tax liability of the appellant for the normal period along with interest.
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