2026-VIL-637-MAD-ST
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SERVICE TAX High Court Cases

Service Tax - Liability of Sub-contractor for Maintenance, Management and Repair Services – Appellant engaged as a sub-contractor by a system integrator to carry out maintenance, management and repair services of leased lines and related equipment claims no service tax liability as the services were rendered at the behest of the system integrator who has already discharged the service tax liability – Demand invoking the extended period of limitation for demanding service tax is therefore not sustainable - Whether the extended period of limitation can be invoked to demand service tax from a sub-contractor when the main contractor has already paid service tax – HELD - On reading of Section 65(64) with Section 65(105) (zzg) of the Finance Act, as it stood from July 2004 to March 2008, it is clear that the Appellant is engaged in taxable services falling within the definition of "Management, Maintenance and Repair Services" and cannot be considered merely as a sub-contractor. The Tribunal has rightly held that non-payment of service tax for the maintenance, management and repair services came to light only during the course of internal audit by the Department, thereby establishing suppression. The extended period of limitation for demanding service tax is therefore sustainable, and the waiver of penalty by the appellate authority in exercise of its discretionary power on the ground of reasonable cause does not exonerate the service provider from the substantive tax liability - The plea of revenue neutrality is factually incorrect as a part of receipt is for services rendered on Maintenance, Management and leased lines – Further, the payment of service tax by the main contractor does not absolve the sub-contractor of independent tax liability – The Tribunal order is confirmed and the appeal is dismissed
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