2026-VIL-1045-CESTAT-AHM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Liability of sub-contractor providing works contract services – Appellant engaged in providing construction and works contract services argues that since the principal contractor has already discharged service tax on the entire contract value, demanding service tax again from the sub-contractor would amount to double taxation - Whether a sub-contractor is liable to pay service tax on services provided to a main contractor, even when the main contractor has already paid service tax on the gross contract amount – HELD - A sub-contractor is liable to pay service tax irrespective of whether the main contractor has paid service tax or not. The Larger bench decision in Melange Developers Pvt Ltd held that a sub-contractor is essentially a taxable service provider and the fact that services provided by sub-contractors are used as input services does not alter their taxability. The statutory framework under Sections 66 and 68 of the Finance Act, 1994 requires every person providing taxable service to pay service tax in the prescribed manner. The concern of double taxation is addressed through the CENVAT Credit Rules, 2004, which allow the main contractor to take credit of service tax paid at the preceding stage. The mechanism ensures there is no actual double taxation as the credit provisions enable each service provider in the supply chain to utilize tax paid on input services against their output service tax liability. Therefore, the demand for service tax from the sub-contractor is valid and not barred by the principle of double taxation - The appeal is disposed of by way of remandrnrn^Applicability of extended period of limitation for raising service tax demand – HELD - For the period from February 2016 to December 2016, the relevant date for determining limitation would be the date of filing the ST-3 return, which was 25th April 2016 for the period October 2015 to March 2016. The show cause notice issued on 30th August 2018 falls within 30 months from the relevant date under the Finance Act, 2016. Therefore, even though the show cause notice invokes extended period in the charging section, the demand is actually within the normal period of limitation and the revenue's case is not hit by any time bar.rnrn^Admissibility of cum tax benefit in computing service tax liability - The appellant is entitled to the benefit of Section 67(2) of the Finance Act, 1994, which provides that where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be computed such that with the addition of tax payable it equals the gross amount charged - The matter is remanded to the adjudicating authority to recalculate the service tax liability by granting the benefit of cum tax as per Section 67(2).
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