Custom, Excise & Service Tax Tribunal
M/S Sailaja Industries vs Cce, C & St, Visakhapatnam-Ii on 9 December, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. ST/22981/2014 (Arising out of Order-in-Appeal No. 10/2014 (V-II) ST dt. 16.06.2014 passed by CCE, C & ST (Appeals), Visakhapatnam) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Sailaja Industries ..Appellant(s) Vs. CCE, C & ST, Visakhapatnam-II ..Respondent(s)
Appearance Sh. Y. Sreenivasa Reddy, Advocate for the Appellant.
Sh. Nagraj Naik, Deputy Commissioner (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of Hearing: 09.12.2016 Date of Decision: 09.12.2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.]
1. The appellants are engaged in undertaking fabrication, erection, commissioning and installation of various equipments/structures for M/s RINL and M/s JSW Ltd., etc. The appellants executed the jobs to these companies as sub-contractor of M/s Raunaq International Ltd, M/s L & T Ltd, M/s Simplex Ltd etc. They were issued a show cause notice dated 31.10.2012 raising the following allegations:
(a) That the appellants have undertaken works of nature of erection, commissioning and installation services and supply of tangible goods.
(b) That on re-conciliation of ST3 returns for the period 2007-08 to 2010-11 with income as per Profit & Loss account there was short payment of service tax.
(c) That the appellants have not paid service tax in respect of sub-contracting works executed on behalf of M/s L & T Ltd, M/s Raunaq International Ltd, M/s Alstom Projects India Ltd., and M/s Simplex Ltd., for the period 2007-08 to 2010-11.
2. After due process of law, the original authority confirmed service tax demand of Rs. 34,84,257/- payable under Erection Commissioning and Installation services; confirmed the demand of Rs. 39,375/- payable under Supply of Tangible Goods for use along with interest and imposed penalty of Rs. 35,23,632/- under section 78 of the Finance Act. The appellant filed appeal before the Commissioner (Appeals) who vide the order impugned herein upheld the order passed by the adjudication authority. Hence the appellants are now before the Tribunal.
3. On behalf of appellant Ld. Counsel Sh. Y. Sreenivasa Reddy submitted that the present appeal is filed against demand of Rs. 34,84,257/- confirmed by the original authority under the category of Erection, Commissioning and Installation services and also for an amount of Rs. 39,375/- confirmed under the category of Supply of Tangible Goods service. He submitted that the appellant had discharged service tax liability to the tune of Rs. 1,49,001/- which has been appropriated by the lower authority. He submitted that the appellant did most of the works as sub-contractor to the main contractors viz: M/s L & T Ltd, M/s JSW Ltd etc. The appellant did not discharge service tax in these case for the reason that the main contractor had paid the service tax on the entire contract amount. The SCN is issued on the view taken by the department that even though the main contractor has discharged the liability, the sub-contractor is also liable to pay the service tax for the same services. The department has relied upon the Board Circular No. 96/7/2007-ST dated 23.08.2007 to hold that the appellant is liable to pay service tax as sub-contractor even though the main contractor has discharged the liability on the same services / entire contract. The appellant had contested the show cause notice on the following contentions also:
(a) Even otherwise, demand of service tax on fabrication works is not legal.
(b) Demand of service tax on the basis of P & L account without deducting the receivables, VAT, ST and other amounts is improper.
(c) Suppression of facts cannot be alleged when they did not pay service tax on bonafide belief that sub contractor again need not pay service tax.
4. The Ld. Counsel pointed out that the Commissioner (Appeals) did not go into the entire contentions raised by the appellants, but has simply confined to the issue whether the appellant is liable to discharge service tax when the main contractor has paid the service tax. Though the appellant had raised the contention that service tax is not liable to be paid on fabrication works and also that the valuation of the taxable services should not include the receivables, VAT etc., the same was not considered at all by the authorities below. He therefore requested remand of the matter to consider these contentions raised by the appellant. Further, that the Commissioner (Appeals) erred in relying upon the Board Circular to conclude that appellant as a sub-contractor has to pay service tax even though service tax is discharged by main contractor. The Ld. Counsel relied upon the decision laid in the case of M/s DNS Contractor Vs CCE, Delhi [2015 (37) STR 848 (Tri.-Del)], M/s West Coast India Constructions Vs CCE & ST [2014-TIOL-2699-CESTAT-BANG] and Nana Lal Suthar Vs CCE, Jaipur-I [2015-TIOL-2357-CESTAT-DEL] to convass the proposition that when the main contractor has discharged the service tax liability the sub-contractor is absolbed from the liability to pay tax on the same services. The Ld. Counsel has relied upon the decision in the case of CCE, Kanpur Vs M/s Shri Shanker Engineering Works [2014 (36) STR 436 (Tri.-Del)] and M/s Neo Structo Construction Ltd., Vs CCE & C, Surat-I [2010 (19) STR 361 (Tri.-Ahmd)] to contend that the fabrication works and fabrication activity amounts to manufacture and therefore are not liable to service tax. The other grievance is that the demand of service tax has been confirmed basing on P & L account without deducting the receivable, service tax, VAT, export turnover which is arbitrary and illegal. That the appellant is a proprietor and is liable to pay service tax only on receivable and not on billed amount. That though the appellant produced documentary evidences to establish these contentions put forward by him, the Commissioner (Appeals) failed to consider these contentions.
5. On behalf of department, the Ld. AR Sh. Nagraj Naik reiterated the findings in the impugned order. He relied upon the Board Circular dated 23.08.2007 and contended that the appellant is liable to discharge the service tax liability though the main contractor has paid the service tax for the entire contract. He also argued that the fabrication works would come under the taxable activity as the appellant has not paid excise duty on the goods fabricated and has not stated the type of goods which have been fabricated. He also submitted that fabrication activities become part of installation works and therefore are taxable services.
6. I have heard both sides. It is indeed correct that the Commissioner (Appeals) has considered only one contention put forward by the appellant. The Commissioner (Appeals) has confined his discussion only to the issue whether the appellant is liable to pay service tax even though the main contractor has discharged the service tax liability on the entire contract. This issue stands covered by the judgment relied by appellant. The Commissioner (Appeals) had relied upon the Board Circular. Needless to say that the Board Circular is not binding upon the assessee. However, the other contentions have not been considered at all. It is seen that appellant has paid service tax for some services which he was main contractor. However, there is no clarity on the amount which the appellant has discharged liability as main contractor and regarding the amount which the appellant contends that he is not liable to pay as a sub-contractor. It is therefore fit to remand the matter to the adjudicating authority to consider the matter fresh after giving reasonable opportunity of personal hearing to the appellant and also sufficient time to furnish further evidence if necessary. The original authority shall also consider the contentions put forward by the appellant regarding deductions. The impugned order is set aside. The appeal is allowed by way of remand.
(Order pronounced & dictated in open court) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Jaya.
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