Custom, Excise & Service Tax Tribunal
Anju Engineering Works vs Commissioner Of Central Excise, Nagpur on 5 January, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/89509/13 (Arising out of Order-in-Original No. 17/ST/2013/C dt. 23.07.2013 passed by the Commissioner of Central Excise & Customs, Nagpur ) Anju Engineering Works : Appellant VS Commissioner of Central Excise, Nagpur : Respondent
Appearance Shri Bharat Raichandani, Advocate for Appellant Shri Vivek Dwivedi, Asstt. Commr. (A.R) for respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) Date of hearing : 05/01/2018 Date of pronouncement : 28/02/2018 ORDER NO.
Per : Raju This appeal has been filed by M/s. Anju Engineering Works against confirmation of demand of service tax, interest and imposition of penalty under Section 76, 77 & 78 of Finance Act, 1994.
2. Ld. Counsel for the appellant argued that they are a Proprietorship firm and were awarded sub-contract by M/s. Sunil Hi-Tech Engineers Ltd. M/s. Sunil Hi-Tech Engineers Ltd. were the main contractors. The activity undertaken by the appellant was classified as erection, installation and commissioning service. Demand show cause notice was issued and the same was confirmed against the appellant. It was argued that the activity of the appellant is not covered by the description of erection, installation or commissioning service as defined under the Finance Act, 1994. He argued that the activity of the appellant was supply of skilled and unskilled labour for carrying out the work such as shifting, erection, pre-assembly, testing and commissioning of pressure parts & non-pressure parts of boiler at project sites. It was argued that the appellants were merely supplying the labour under the supervision and control of the main contractor.
2.1. He further argued that the main contractor has paid tax on the entire value and therefore no demand of service tax can be made against the sub-contractors, relied on the following trade notices.
(A) Trade Notice No. 7/97-ST dated 4.7.1997, Mumbai Commissionerate-I (B) Trade Notice No. 7/97-ST dated 13.10.1998, Mumbai Commissionerate (C) Trade Notice No. 1/96-ST dated 31.10.1996, Mumbai Commissionerate (D) Trade Notice No. 1/96-ST dated 31.10.1996, Mumbai Commissionerate ( E) Ministrys Letter F. No. B-II/I/2000-TRU, dated 09.07.2001 (F ) M.F. (D.R.) Circular No. 23/3/97/ST dated 13.10.97.
On the strength of above circular he argued that the intention of the Government has always been main contractor of service tad on the entire contract value, the sub-contractor need not pay service tax. He argued that in these circumstances there would be no revenue loss to the government, as the government has already recovered service tax of the entire value of contract from the main contractor.
2.2. Ld. Counsel relied on the decision of Tribunal in case of BBR India Ltd. Vs. CCE 2006 (4) STR 269 wherein following has been observed:
.......liability to pay service tax to the Government is on the prime consultant and not on the sub-consultant, who is the appellant and the appellant is not liable to pay service tax demanded.
On this count Ld. Counsel argued that the entire exercise is revenue neutral.
2.3. Ld. Counsel further argued that the demand has been raised on the entire value of the contract which includes consideration for material supplied as well as services rendered. He argued that no demand can be made in respect of the consideration received pertaining to supply of material. Ld. Counsel further sought benefit of cum duty price in calculation of service tax.
2.4. Ld. Counsel further argued that extended period of limitation is not invokable as there was no deliberate mis-declaration on their part. He relied on the decision of Honble Apex Court in the case of Pushpam Pharmaceutical Vs. Collector C. Ex. Bombay 1995 (78) ELT 401 (SC). He further argued that mere failure to declare the Revenue without any intention to evade payment of duty does not amount to suppression of facts. For this assertion he relied on the decision of Honble Apex Court in the case of Continental Foundation Vs.CCE 2007 (216) ELT 177 (SC). He further argued that no penalty can be imposed on the appellant.
2.5. He further argued that fabrication of structural item at site would amount to manufacture in terms of Section 2(f) and therefore no service tax can be demanded on the said activity. For this argument he relied on the Larger Bench decision of Tribunal in the case of Mahindra & Mahindra Ltd. 2005 (190) ELT 301 (T.-LB).
3. Ld. AR relies on the impugned order. He further relied on the decision of Tribunal in the case of Peekayam Engineers order No. A/90344/17/STB dt. 30.10.2017 where all these issues have been specifically considered in the a case involving others sub-contractors of the some main contractor namely Sunil Hi-tech Engineers Limited.
4. We have gone through the rival submissions. We find that in case of Peekayam Engineers Ltd. vide order No. A/90344/17/STB dt. 30.10.2017. The identical issues were raised and the same have been decided by vide Order No. A/90344/17/STB dt. 30.10.2017 in the said order following has been observed:
4. We have gone through the rival submissions.
4.1 The first issue that we examine is if there will be a revenue loss to government or this is a revenue neutral situation. The main contractor is involved in Erection Commissioning and Installation service. In respect of this service the tax liability is governed by the notifications 19/2003-ST and 01/2006-ST which read as follows notifications 01/2006-ST In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (3) of the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in the corresponding entry in column (2) of the said Table, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (5) of the said Table, of the gross amount charged by such service provider for providing the said taxable service, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table aforesaid :
Table S. No. Sub-clause of clause (105) of Section 65 Description of taxable service Conditions Percentage (1) (2) (3) (4) (5)
5.
(zzd) Erection, commissioning or installation, under a contract for supplying a plant, machinery or equipment and erection, commissioning or installation of such plant, machinery or equipment.
This exemption is optional to the commissioning and installation agency.
Explanation. - The gross amount charged from the customer shall include the value of the plant, machinery, equipment, parts and any other material sold by the commissioning and installation agency, during the course of providing erection, commissioning or installation service.
33Provided that this notification shall not apply in cases where, -
(i) the CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; or
(ii) the service provider has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003].
Explanation. - For the purposes of this notification, the expression food means a substantial and satisfying meal and the expression catering service shall be construed accordingly.
Thus it is apparent if the main contractor was availing of this notification he could not have availed of the credit of the tax paid by the appellant. Thus in those circumstances the situation would not be revenue neutral. Moreover the main contractor has been granted abatement from the value only for the reason that the credit of the duty paid on the inputs and input services (by the sub contractors) has not been allowed, and also for the reason that the sub contractors have already paid duty on the value of inputs and input services. If the appellants contention is accepted it would result in defeating the very purpose of the notification and will also result in loss of revenue to the government. The scheme of Cenvat is designed in such a manner that every service provider is liable to pay service tax. The service receiver, if engaged in provision of taxable service can claim Cenvat Credit of the service. Service tax paid by the input service provider/sub-contractor by providing this mechanism Government had ensure that there is no double taxation and no cascading effect of tax. However, there are certain services in respect of which special dispensation has been provided. In such cases the abatement from value is given subject to condition that no credit of input and input services is taken. In such cases, the tax paid by the input service provider/sub-contractor is not allowed Cenvat Credit to the final service provider. The present case is an example of one such situation. For provision of any output service numerous inputs services are required. For example, a consultant providing consultancy would receives input services in nature of (i) renting of immovable property service (ii) Air Travel services (iii) Business Support Service (iv) Manpower supply service (v) renting a cab services and so on. If the consultant is paying tax on the entire value of service provided by him, then would all services provider listed become exempt from paying service tax as sub-contractor.If the argument of the appellant is accepted then every provision of services to another taxable service provider would not be liable to payment of service. This situation can only lead to chaos.
4.2 This very issue has been dealt with in the case of one of the main contractors by the tribunal. The tribunal has dealt with the question regarding the circular issued by the CBEC in this regard and also the liability under these circumstances. We find that the Tribunal in the case of Sunil Hi-Tech Engineers Ltd. - 2014 (36) STR 408 (Tri-Mum) has observed as follows:
18.?I have carefully gone through the various arguments advanced by the ld. Advocate for the appellant, learned AR as also various arguments written by my learned brothers. At the outset, I think it would be appropriate to understand why circulars are issued by the Board and their scope or validity. Most of the circulars issued by the Board are to explain the intentions of particular provisions of Customs, Central Excise and Service Tax. These circulars also give interpretation of law. Circulars are generally issued with reference to a particular commodity or service and explains the relevant law at that point of time. There is no concept of withdrawing or superseding the circulars in general. It is only when Board changes its view on a issue consequent to the decision of the Honble Supreme Court, Honble High Court or this Tribunal or for some other reason that the circulars are modified or superseded. However, the circulars are to be applied only as per law as it exists at that point of time and with reference to the commodity/services. This is true even in case of service tax. In 2007 an initiative was taken by the Board so that circulars in respect of various services were consolidated in one single circular, known as master circular. At that point of time it was also realized that the large number of circulars have lost their relevance long back due to amendment in the law. Accordingly, such circulars were not part of the new master circular or were stated to be withdrawn. At that point, a general clarification as under was issued -
999.03/ 23-8-2007 A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-contractor, service tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work.
A sub-contractor is essentially a taxable service provider. The fact that services provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor.
Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided.
At times circulars are also used by the Board to take care some administrative difficulties in the administration of tax as particular way of implementation may cause undue hardship. Service tax was introduced in 1994 on three services, in 1996 another three services were added and in 1997 additional three services were brought under the service tax net. At that point of time service tax was not covered by Cenvat credit system i.e. credit of input services or inputs was not available while providing any other output service. Around 2002, concept of Cenvat credit was extended to the services and in 2004 it was extended to the manufacturing and service sector both in a unified manner. In 1997-1998, at the time of introduction of specific services it was realized that in respect of certain services main service provider appoints certain sub-service provider, who may be doing part of the main service and since concept of Cenvat credit was not extended to services, provider of such service would have been put to disadvantage inasmuch as service tax would have been paid by the sub-service provider and the main service provider would also be required to pay the service tax. This difficulty was being faced in respect of certain services, three different circulars covering one specified service each were issued during the period 6th June, 1997 to 11th July, 1997. In 1998 certain additional services became taxable. In respect of one such service an additional circular was issued on 7-10-1998. These four circulars are in respect of specific services. These clarifications were not clarifying any legal interpretation or any provisions of Act/Rule but more were in the administrative nature to sort out cascading effect on service tax. Perhaps, a better way would have been to issue notification achieving the same objective. Be that it may be, this Tribunal cannot extend the scope of such circulars to other services, particularly which were not in existence at that time. Service tax law has been extended to a large number of services from 2002 onwards and scheme of Cenvat credit was extended to services, no such circular has been issued in respect of any of the services which became taxable in 2002 or afterwards. Even in respect of services which were taxable before 2002, the earlier circulars became redundant in view of the change in law. Learned Advocates argument that the old circulars were withdrawn only with the issue of Master Circular on 23-8-2007 is not relevant at all, particularly in view of the fact that the service being dealt in the present case is Commercial or industrial construction service which become taxable when the Cenvat credit scheme was already available. The four circulars which were issued in 1997-1998, in respect of four specified services were in any case redundant even in respect of those four services from 2002 onwards. In 2007, all that was clarified was that sub-contractor is also a service provider, and is liable to pay tax.
19.?I also note that in the present case the appellant had no doubt about the provisions of law and the fact that his activity was chargeable to service tax. This is evident from the fact that the appellant was paying service tax before 1-3-2006. From 1-3-3006 the reason for stopping to make payment is only that the main contractor was specifically made ineligible to take credit of input services vide Notification No. 1/2006. In my opinion if law specifically prohibits doing something, the same cannot be circumvented by stopping to pay duty and claiming benefit of circulars which were not issued even in respect of that service and was also prior to the law at the relevant time i.e. introduction of Cenvat credit scheme to services. Learned Advocate has stated that there is no rationale to restrict the credit of input services in 2006. The Learned Advocate has also stated that it was unintentional. I am unable to subscribe to this argument. If at all, restriction on input service credit was unintentional, the same would have been amended within a gap of few weeks or months. The fact remains, the said restriction has not been lifted in all these years. This therefore cannot be called as unintentional or unreasonable restriction. In fact, perhaps the position prior to 1-3-2006 was unintentional as the contractors were able to reduce their tax liability by creating more than 2 or 3 levels of sub-contractors. This contention/argument of the ld. Advocate therefore does not hold water. In any case, the Tribunal is required to interpret the law as it exist. We also note that the Notification No. 1/2006-S.T. is not being availed by the appellant but by main contractor. If at all such argument has to be given it has to be contended by main contractor who is not even appellant in this case. There does not appear to be any dispute between Revenue and main contractor on the interpretation of Notification No. 1/2006-S.T. It is seen from the above decision that the payment of service tax by main contractor does not exempt sub-contractor from the levy of service tax even during the period when CBEC had issued a circular in this regard. The said decision has been passed after examining the decision in the case of Vijay Sharma (supra) cited by the Ld. Counsel. It is seen that the decision in the case of Vijay Sharma was largely based on the fact that the credit of service tax paid by sub-contractor would be available to the main contractor. It was also based on the fact that sub-broker is also considered as broker. In so far as the client is concerned, both these factors are missing. In the instant case, the sub-contractor cannot be treated as contractor and the duty paid by the sub-contractor is not necessarily available as credit to the main contractor. Moreover the appellants in this case are not providing the services directly to the client as the agent of the main contractor. Moreover there is no abatement and no restriction regarding the availability of credit to the main contractor. Thus in those circumstances there was a revenue neutral situation unlike the present case.
4.3 Ld. Counsel relied on the decision of the Tribunal in the case of Akruti Projects (supra), it is seen that the entire findings of the said decision are reproduced below:
5.?Having considered the rival contentions, I find that the Notification No. 1/2006-S.T. is in confrontation with the charging section. Section 66 of the Finance Act, 1994 and accordingly I hold the same is not applicable in the facts and circumstances of the case so far as the condition relating to not taking of Cenvat credit is concerned of the Service Tax paid by the sub-contractor. Further, I notice that the finding of fact recorded by the adjudicating authority having not been challenged by any of the parties, and in view of the categorical finding of fact recorded, I hold that the respondent assessee is entitled to refund and accordingly, the appeal of the Revenue is dismissed.
5.1?In view of the ruling of the Honble Apex Court in the case of L & T Ltd. (supra), I hold that opinion of the third member as rendered in the case of Sunil Hi-tech Engineers Ltd. (supra) by this Tribunal is not binding and held per incuriam, as the same is directly in the teeth of the ruling of the Apex Court and is passed without taking notice of the aforementioned ruling of the Honble Supreme Court.
It is seen that the decision of the Tribunal in the case of Akruti Projects (supra) essentially relied on the decision of the Honble Apex Court in the case of Larsen & Toubro Ltd. -2006-TIOL-327-HC-HYD-VAT. In para 4.2 and 4.3the extract of said decision have been placed which reads as follows:
4.2?The appellant further relies on the ruling dated 12-10-2006 in the case of Larsen & Toubro Ltd. v. State of Andhra Pradesh - 2006-TIOL-327-HC-HYD-VAT, wherein it has been held that when a contractor awards either wholly or partially, the contractual obligation to a sub-contractor there is another agreement between the contractor & sub-contractor, which is pro tanto identical in nature with the agreement between the employer and the contractor. Therefore, there are two works contracts in existence between the three parties mentioned above for carrying out the one and the same task. It was further noticed by the Honble High Court that there is no agreement between the employer and the sub-contractor and consequently, there is no legal relationship creating either rights or obligations between them under an agreement. In between the employer and the sub-contractor, in view of the Honble High Court, the relationship is simply that the sub-contractor is an agent of the contractor. Under Section 182 of the Indian Contracts Act, an agent is defined to be a person employed to do any act for another. Thus, the role of a sub-contractor in the context of the issue under examination is simply that of an agent of the contractor either from the point of the employer or from the point of view of the rest of the world. Though there are two agreements satisfying the definition of a works contract under the VAT Act.
4.3?The aforesaid order of the Honble High Court was challenged by the State of Andhra Pradesh before the Honble Supreme Court, wherein at para 17 of the order dated 26-8-2008 reported in 2008-TIOL-158-SC-VAT, the Supreme Court took notice that the issue before it was whether the turnover of the sub-contractor is to be added to the turnover of the main contractor (L & T). In other words, the question which the Court was required to answer was as to whether the goods supplied by the sub-contractor occurred in the form of single deemed sale or multiple deemed sales. The Honble Supreme Court observed that the issue stands clarified in ruling of the Builders Association of India - 1989 73 STC 370, wherein it was held that ordinarily unless there is a contract to the contrary in the case of works contract the property in the goods used for construction passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building. As per the Revenue, there are two deemed sales, one between the main contractor and contractee and the other between sub-contractor and the main contractor, in the event of the contractee not having any privity of contract with the sub-contractor. The Honble Supreme Court in this ruling held that there is only one sale and only one transaction of the property in the goods and observed as follows : -
19.?If one keeps in mind the above quoted observation of this Court in the case of Builders Association of India (supra) the position becomes clear, namely, that even if there is no privity of contract between the contractee and the sub-contractor, that would not do away the principle of transfer of property by the sub-contractor by employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. It is subject to the contract to the contrary. Thus, in our view, in such a case the work, executed by a sub-contractor, results in a single transaction and not as multiple transactions. This reasoning is also borne out by Section 4(7) which refers to value of goods at the time of incorporation in the works executed. In our view, if the argument of the Department is to be accepted it would result in plurality of deemed sales which would be contrary to Article 366(29A)(b) of the Constitution as held by the impugned judgment of the High Court. Moreover, it may result in double taxation which may make the said 2005, Act vulnerable to challenge as violative of Articles 14 (1)(g) and 265 of the Constitution of India as held by the High Court in its impugned judgment.
20.?Before concluding, we may refer to one more aspect. It appears that after the impugned judgment, the Department has amended Rule 17 of the APVAT Rules, 2005 vide Government Order dated 20-8-2007. The position has been clarified vide Rule 17(1)(c) (as amended). It is now clarified that where a VAT dealer awards any part of the contract to a registered sub-contractor, no tax shall be payable on the consideration paid for the sub-contract. Therefore, in our view, the principle to be adopted in all such cases is that the property in the goods would pass to the owner/contractee on its incorporation in the works executed. This principle finds place in sub-section 7(a) of Section 4 of the said 2005 Act. It is seen that the said decision has been passed with respect to the VAT on works contract. The said decision of the Honble Apex Court in the case of Larsen & Toubro Ltd. (supra) relies on the decision of the Honble Apex Court in the case of Builders Association of India 1989 (73) STC-370 wherein it has been held that ordinarily unless there is a contract to the contrary in the case of works contract, the property in goods used for construction passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building. The fact in the said case are substantially different. The VAT is levied at the time when the property in goods is passed. In the case of Builders Association of India (supra) the Honble Apex Court has observed that in case of works contract when goods are constructed on land belonging to the owner of the land then immediately on such construction, the property of the goods passes to the owner of the land. Thus, when a sub-contractor does construction work on a land, the propriety passes to the owner of the land immediately on construction. These are peculiar facts with reference to the works contract involving construction on land. This argument would not apply to the provision of service as there is no property transaction taking place which involves direct transfer from sub-contractor to the main recipient of service. In the instant case, the appellants are involved in providing services to the main contractor which they claimed to be a sub-contract. The appellants are providing services to the main contractor and not the owner of the land. Moreover the nature of services provided by the appellants to the main contractor is not the same as those provided by the main contractor to its client.
4.4 The appellants are relied on various trade notices issued by various Commissionerate. The following are the trade notices:
a) Trade Notice No.7/97-ST dated 04/07/1997, Mumbai Commissionerate-I - 2.4. The services should be rendered to a client directly and not in the capacity of a sub-consultant/associate consultant to another consulting engineer, who is the prime consultant. In case services are rendered to the prime consultant, the levy of the service tax does not fall on the sub-consultant but it falls on the prime or main consulting engineer who raises a bill on his client (which includes the charge for services rendered by the sub-consultant.
b) Trade Notice No.7/98-ST dated 13/10/1998, Mumbai Commissionerate: - 4.6 Further, in cases where an architect/interior decorator sub-contracts part/whole of his work to another architect/interior decorator, it is clarified that no service tax is required to be paid by the sub-contractor provided that the principal architect/interior decorator has paid the service tax on the services rendered by him to the client and provided the sub-contracting is in respect of the same service category. In other words work is sub-contracted by one architect to another architect. In such cases, if the principal architect pays the service tax on services rendered by him to his client, the sub-contracting architect is not required to pay the service tax. However, service tax would be required to be paid in a case where sub-contracting is to a different service category. For example where an architect sub-contacts his work to a consulting engineer, then service tax would be required to be paid by both the architect and the consulting engineer on the service rendered by them. Similarly, a market research agency would be required to pay service tax on services rendered by it to an advertising agency, even if the advertising agency is also liable to pay service tax on the amount billed to its client for advertising services (which inter alia, includes the amount paid by the advertising agency for such market research services to the market research agency.
c) Trade Notice No.1/96-ST dated 31/10/1996 Mumbai Commissionerate: - 6. It has been represented that in many cases the advertising agency gets a documentary or film prepared by an independent film producer on behalf of the client. In such cases, the film producer deals with the advertising agency and the payment to him is also made by the advertising agency and not by the client directly. Ultimately,however the advertising agency charges the client for the amount paid to the film producer. Under these circumstances a question has been raised whether the film producer is also liable topay service tax on the documentary or film prepared by him in relation to an advertisement. In this connection, it is relevant to note that taxable service is a service provided to a client by an advertising agency in relation to advertisement in any manner. Client is the advertiser. Therefore, in this case the advertising agency cannot be considered as a client when the definition of taxable service in relation to advertisement is interpreted in proper context. Accordingly, it is clarified that a film producer in this case is not liable to service tax. However, producer in this case is not liable to service tax. However, the advertising agency will no doubt include the expenses incurred on getting the film or documentary will bed collected by the agency. It goes without saying that if the film producer chooses to charge the client directly for the film or documentary produced by him then the film producer is to be regarded as having rendered service to the client in relation to advertisement and he will therefore, be liable to pay service tax accordingly.
d) Trade Notice No.1/96-ST dated 31/10/1996 Mumbai Commissionerate: - 5 In this context, it is clarified that co-loaders provide service to the courier agencies as such. They do not provide directly any service to the customer who gives the documents, goods or articles to the courier agency for their delivery to the consignee. What is chargeable to service tax is the service provided by courier agency to the customer. In this case, the courier agency being not a customer as such, the service provided by co-loader to the courier agencyis not chargeable to service tax. It is significant to point out that the charges of the co-loaders to the courier agency for in-transit movement of goods, documents or articles are in any case ultimately recovered by the courier agency from the customer and these charges are include in the gross amount charged by the courier agencies from customers on which the service tax is computed.
e) Ministrys letter F.No.B-II/I/2000-Tru, dated 09/07/2001.
Q.1 Whether lending/hiring of Video/Sound Recording equipment come under service tax?
Ans. The lending/hiring of Video/Sound Recording equipment is in the nature of sub-contracts and because the sub contractors are nto providing the services to the customer directly, they are not required to pay the service tax.
f) M.F (D/R) Circular No.23/3/97/ST dated 13/10/97 Issue: whether rent and access charges for providing junctions for mobile operation to cellular telephone operators by DOT will be subject to no service tax.
Cellular telephone services between two subscribers holding cellular phone and also with persons holding local telephone. While the company charges home net work/air time charges on their subscribers using their network cellular phone facility, additionally they collected land line charges when the subscribers calls other than cellular phone numbers which are routed through the DOT network for which they are provided with junctions. Cellular telephone operators are required to pay to DOT rent charges on junctions in addition to DOT charges collected at specific rate per unit from their customers.
Decision: Cellular phone operators are realizing rent and access charges from their subscribers and as such when cellular companies pay service tax on the amounts received by them from their subscribers it includes rent and access charges and as such to charge again service tax on their charges by DOT will amount to double taxation. Board is of the view that no service tax is again chargeable on rent and access charges paid to DOT by cellular phone operators. A perusal of the above circular clearly indicates that the services in respect of which the clarification has been issued relates to the services where the exercise is revenue neutral. In all these cases the main provider of service is put to tax on full value and in those circumstances if the sub-contractor/input service provider pays any service tax, the same is available as credit to the main service provider. It is apparent that these circulars were intended to reduce un-necessary work and not to provide exemption or give away revenue. In the instant case however, the main contractor is not entitled to the credit of service tax paid by sub-contractor if he is availing notification No.01/2006. Thus any service tax paid by the subcontractor would come as revenue to the Government and no credit of same would be available to the main contractor. Relying of aforesaid decision in identical circumstances we find that the appeal fails on merit.
5. In so far as the issue of limitation is concern, it is seen that the appellant have not disclosed the information relating to these services in their half yearly return. Failure to submit this information in the half yearly return clearly points to mis-declaration on behalf of the appellant. There is no general principle that all sub-contractors are exempted from the tax if the main contractor has discharged the tax. In this specific case to the appellant have not produces any grounds for reaching the belief that they are not liable to service tax being sub contractors. The cenvat chain is generally made in a manner that all the persons providing service to others can claim cenvat credit. It results in a revenue neutral situation as the receiver of the service is entitled to take credit. In the instant case, the service recipient was not entitled to cenvat credit. Thus there was absolutely no case of revenue neutrality. In these circumstances it is apparent that there was a clear case of mis-declaration with intention to evade service tax invocation of extended period of limitation and imposition of penalty under Section 78 is fully justified. Simultaneous penalties under Section 76 and 78 cannot be imposed in view of decision of Honble High Court of Punjab and Haryana in case of Commissioner of Central Excise Vs. First Flight Courier Ltd. 2011 (22) STR 622 (P & H). Penalty under Section 76 is set aside.
6. It is however seen that the appellant have claimed benefit of recalculation of duty on the cum tax basis relying on the decision of Honble Apex Court in the case of Collector v. Srichakra Tyres Ltd. 2002 (142) ELT A279 (S.C.) in case of Maruti Udyog Ltd. 2002 (49) RLT 1 (SC). In view of above, the benefit of cum tax is admissible to the appellant.
7. The appeal is partly allowed in above terms and the matter is remanded to the original adjudicating authority to work out the revise remand and consequent penalties.
(Pronounced in court on 28/02/2018)
(Ramesh Nair)
Member (Judicial)
(Raju)
Member (Technical)
SM.
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ST/89509/13