Custom, Excise & Service Tax Tribunal
Delux Engineering Concern vs Haldia on 24 October, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76423 of 2014
(Arising out of Order-in-Original No. 20/Commissioner/CE/Haldia/Adjn/2014 dated
06.08.2014 passed by the Commissioner of Central Excise & Service Tax, Haldia
Commissionerate, 25, Princep Street, Kolkata - 700 072)
M/s. Delux Engineering Concern : Appellant
D-Block, Durgachak Colony, Haldia,
Purba Medinipur - 721 602
VERSUS
Commissioner of Central Excise and Service Tax : Respondent
Haldia Commissionerate,
25, Princep Street, Kolkata - 700 072
APPEARANCE:
Shri S.P. Siddhanta, Consultant for the Appellant
Shri Faiz Ahmed, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77211 / 2024
DATE OF HEARING: 23.09.2024
DATE OF DECISION: 24.10.2024
ORDER:[PER SHRI K. ANPAZHAKAN] M/s. Delux Engineering Concern, D-Block, Durgachak Colony, Haldia, Purba Medinipur - 721 602 (hereinafter referred to as the "Appellant") have been registered with the Service Tax Department for providing taxable services under the category of 'Manpower Recruitment or Supply Agency Service'. The Appellant has entered into an agreement on 30.06.2004 with M/s. Prism Logistics Private Limited, 33A, Jawaharlal Nehru Road, 4th Floor, Suite Page 2 of 7 Appeal No.: ST/76423/2014-DB No. 11, Kolkata - 700 071, for supply of labour for undertaking and supervising different jobs in the in- plant logistics of M/s. South Asian Petrochem Limited, Haldia. The above said activity of supply of labour falls within the taxable service category of 'manpower recruitment or supply agency service' as defined under Section 65(105)(k) of the Finance Act, 1994.
2. On verification of the certificates of Tax Deducted at Source (TDS) received from the Income Tax Department, it was found that the Appellant had not paid appropriate Service Tax on the amount realized from the service providers under the category of manpower recruitment or supply agency service. Accordingly, a Show Cause Notice dated 21.09.2012 was issued to the Appellant demanding Service Tax of Rs.67,98,238/-, along with interest, and penalty.
3. The said Notice was adjudicated by the ld. adjudicating authority vide the Order-in- OriginalNo.20/Commissioner/CE/Haldia/Adjn/2014 dated 06.08.2014 (hereinafter referred to as the "impugned order") wherein the Ld. Commissioner has confirmed the demand of Service Tax of Rs.67,98,238/- along with interest and imposed equal amount of tax as penalty under Section 78 of the Finance Act, 1994.
3.1. Aggrieved against the confirmation of the above said demands, the Appellant has filed this appeal.
4. The Appellant submits that they had entered into an agreement with M/s. Prism Logistics Pvt. Ltd. in the year 2004 and supplied labour. As per the Agreement, the main contractor used to pay service tax on the full value realized from the service receiver; they have never paid service tax on the amount Page 3 of 7 Appeal No.: ST/76423/2014-DB received from the main contractor, as the main contractor has discharged service tax liability on the entire value; As the main contractors have paid Service Tax on the entire amount received towards the service rendered, they were under the impression that being sub-contractors, they need not pay Service Tax.
4.1 The Appellant submits that Circular No. 96/7/2007-S.T. dated 23.08.2007 was issued by the Board, which clarified that sub-contractors were also required to pay Service Tax when the main contractor has paid Service Tax on the entire value as the sub- contractor would be eligible to take CENVAT Credit. Even after issue of this Circular, they were under the bona fide belief that the sub-contractors are not liable to pay service tax, as the entire issue is revenue neutral.
4.2. The Appellant submits that they have not suppressed any information from the Department; the Show Cause Notice has been issued on the basis of scrutiny of the returns filed; the bills, balance-sheet and contracts with the main contractor were also scrutinized; no objections were raised by the Department during the course of such scrutiny. The Appellant has also submitted evidences to the extent that the main contractor viz. M/s. Prism Logistics Pvt. Ltd. has paid Service Tax on the entire amount received by them.
4.3. In support of their argument of revenue neutrality, the Appellant placed reliance on the decision of this Tribunal in the case of National Building Construction Corporation Ltd. v. Commissioner of C.Ex. & S.Tax, Patna [2011 (23) Page 4 of 7 Appeal No.: ST/76423/2014-DB S.T.R. 593 (Tri-Kol.)] wherein the Tribunal has observed that: -
"9. ...
(f) NBCC has claimed to have paid service tax on the entire amount received from M/s. NTPC; the tax was not paid by the sub-contractors on the basis of Board's clarification dt. 14-9-97; and if the tax was paid by the sub-contractors the same was available as credit to NBCC and therefore, it is a case of revenue neutrality. Therefore, no tax is demandable from the sub-contractors."
4.4. Accordingly, the Appellant submits that the entire issue is revenue neutral. In view of the above submissions, the Appellant contends that the demand confirmed in the impugned order by invoking the extended period of limitation is not sustainable.
5. On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order.
6. Heard both sides and perused the appeal records.
7. We observe that the Appellant has supplied labour to M/s. Prism Logistics Pvt. Ltd. as per the agreement entered into between the parties. The service of supply of labour is a taxable service under the category of 'manpower recruitment or supply agency service' as defined under Section 65(105)(k) of the Finance Act, 1994.
7.1. We find that the Appellant has not disputed the liability to Service Tax on the said services rendered by them to the main contractor viz. M/s. Prism Logistics Pvt. Ltd. The Appellant is primarily Page 5 of 7 Appeal No.: ST/76423/2014-DB contesting the demand on the ground of limitation stating that they have not suppressed any information from the Department and that the Department has raised the demands based on the documents submitted by them. Accordingly, they have contended that the demands raised by invoking the extended period of limitation are unsustainable.
7.2. We observe that the Circular No.96/7/2007-S.T. dated 23.08.2007 has been issued clarifying that sub- contractors are required to pay Service Tax even when the main contractor has paid Service Tax on the entire amount, since the sub-contractor will be eligible to take CENVAT Credit thereon. Accordingly, we observe that after 23.08.2007, sub-contractors are liable to pay Service Tax even if the main contractor pays the Service Tax on the entire amount.
7.3. We observe that there was confusion prevalent on this issue. The Board had also issued a clarification dated 14.09.1997 wherein it had been clarified that sub-contractors were not liable to pay Service Tax when the main-contractor had paid Service Tax on the entire amount as the issue involved is revenue neutral. Only after issue of the Circular dated 23.08.2007 by the Board, the doubt about the liability to Service Tax of the sub-contractor has been clarified. However, may service providers continue to adopt the old practice of non-payment of service tax treating the issue as revenue neutral.
7.4. In the present case, we observe that the Appellant had entered into the agreement in the year 2004 and the main contractor had been paying Service Tax. The Appellant has not paid service tax on the amount received by them as a sub-contractor and Page 6 of 7 Appeal No.: ST/76423/2014-DB no objection was raised at any point of time. We observe that the Show Cause Notice was issued on the basis of scrutiny of TDS certificates received from the Income Tax Department. Prior to that, the bills, balance-sheet and contracts with the main contractor were scrutinized by the Department and no objection has been raised. Therefore, we hold that suppression of facts with intention to evade the tax has not been established in this case. For the same reason, the penalty under Section 78 of the Finance Act, 1994 is not imposable on the Appellant.
8. In view of the above, we hold that the demand of Service Tax by invoking the extended period of limitation is not sustainable. Accordingly, we set aside the impugned order and remand the matter back to the adjudicating authority for the purpose of calculating the Service Tax liability for the normal period of limitation, if any. The Appellant is liable to pay service tax along with interest for the normal period of limitation.
9. In view of the above, we pass the following order: -
(i) The demand raised by invoking the extended period of limitation is not sustainable.
The demand of service tax, if any, along with interest is upheld for the normal period of limitation.
(ii) The matter is remanded back to the adjudicating authority for calculating the Service Tax liability for the normal period of limitation, if any.
(iii) No penalty is imposable on the Appellant.
Page 7 of 7Appeal No.: ST/76423/2014-DB
10. In these terms, the appeal is disposed of.
(Order pronounced in the open court on 24.10.2024) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd