2025-VIL-476-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Sub-contractor, Works Contract Service, Extended Period of Limitation - Appellant is sub-contractor who undertook activities of construction service along with materials for refractory work - Department demand service tax on 33% of the gross amount received by the appellant, classifying the service under "Commercial or Industrial Construction Service". The appellant contended that the services rendered by them are composite in nature and are appropriately classifiable under the category of "Works Contract Service" - Whether the sub-contractor is liable to pay service tax when the main contractor has discharged the service tax liability - HELD - The Tribunal relied on the clarification issued by the Board vide Circular No. 96/7/2007-S.T. dated 23.08.2007, which stated that even if the main contractor pays Service Tax, the sub-contractor is still liable to pay Service Tax on the services rendered by them to the main contractor. However, the Tribunal also noted that the Larger Bench of the Tribunal in the case of CST, New Delhi V. M/s. Melange Developers Pvt. Ltd. had overruled the contrary view and held that a sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability – Further, during the period under dispute, Trade Notice No.53-C.E (service Tax) /97 dated 04.07.1997 was in existence, which clarified that the sub-contractor is not liable to pay service tax when the main contractor discharges service tax on the entire value. The appellant cannot be held responsible for non-payment of service tax for the period under dispute - the impugned order set aside and appeal is allowed - Whether the extended period of limitation can be invoked to demand service tax - HELD – Tribunal observed that the appellant has not suppressed any information from the department and has regularly filed ST-3 returns declaring that they have not paid service tax as a sub-contractor as the principal contractor paid service tax. The departmental audit conducted in 2008 also did not raise any objection for non-payment of service tax. The Tribunal held that the demand of service tax by invoking the extended period of limitation is not sustainable - Whether the services rendered by the appellant are classifiable under "Works Contract Service" - HELD - The contracts awarded to the appellant are composite in nature, involving the provision of services along with materials. The Tribunal held that the services rendered by the appellant are appropriately classifiable under the category of "Works Contract Service" as defined in Section 65(105)(zzzza) of the Finance Act, 1994. The Tribunal further held that prior to June 01, 2007, no service tax is payable by the appellant as they have rendered the services with materials, and for the period post June 01, 2007 also, the demand of service tax can be made only under works contract services.
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