10 June 2024


Customs, Excise and Service Tax Appellate Tribunal

Shree Gurukrupa Construction Company Vs. Commissioner of Central Excise & ST, Rajkot



Service Tax

Sub-contractor is independently liable to pay service tax even though service tax liability has been discharged by main contractor

The brief facts of the case are that, the Appellant had obtained work orders from Gujarat State Police Housing Corporation Limited (GSPHCL) and accordingly during the year 2009-10 to 2011-12 had constructed residential quarters for the staff of the Gujarat Police. The Appellant had also carried out construction of residential complex for Rajkot Municipal Corporation (RMC) as sub-contractor of Avadh Construction. The Appellant had not paid service tax on the said construction service provided to GSPHCL and RMC, therefore the demand was raised and confirmed under the category of Residential Complex Service.

The Appellant fairly concede that, the Appellant being sub-contractor is liable to pay service tax as held by the Larger Bench of this Tribunal in the case of CST, New Delhi vs. Melange Developers Pvt. Limited. However, he submits that, the entire demand is time-barred as the show cause notice was issued beyond the normal period. He submits that, there is no malafide on the part of the Appellant. The appellant had not paid service tax as there was confusion that whether the sub-contractor is liable to pay service tax when the entire service tax was paid by the main contractor. On this issue, there were conflicting judgments and finally the issue was settled by the Larger Bench in the case of Melange Developers Pvt. Limited. Therefore, in these circumstances, it cannot be said that, the appellant suppressed the facts or had malafide intention to evade the service tax.

There is no dispute on the taxability as has been held by the Larger Bench that the sub-contractor is independently liable to pay service tax even though service tax liability has been discharged by the main contractor. Therefore, in the present case, demand on merit is clearly sustainable. As regards the limitation argued by the Counsel, the confusion arose due to Board Circular issued in 2002 wherein the Board has clarified that in case of sub-contractor, the service tax is not payable by sub-contractor, if service tax is discharged by the main contractor. However, the Circular was amended in 2005 and thereafter the issue became clear that, the sub-contractor was required to pay service tax and the conflicting judgments were due to the earlier Board Circular.

However, after 2005, there was no reason for the assessee to believe that, the sub-contractor is not liable for payment of service tax. If any assessee is of the belief that being sub-contractor they are not liable to pay service tax, in the light of amendment in Circular in 2005, the assessee should have approached the department and make the position clear regarding their bonafide belief. But in the present case, the Appellant did not approach the department regarding their bonafide belief nor did they obtain the registration. Therefore, when the Board issued amendment in 2005, it cannot be said that, the Appellant entertained bonafide belief correctly. The impugned order is upheld. The appeal is dismissed.

Tags : Demand Confirmation Legality

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