2026-VIL-1364-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Liability of Sub-contractor, Applicability of Extended Period of Limitation – Whether sub-contractor is liable to pay service tax on services provided to main contractor when principal contractor has already discharged service tax liability and whether extended period of limitation under Section 73(1) proviso can be invoked – HELD – On merits the issue is covered by decision of Larger Bench in CST New Delhi vs Melange Developers Pvt Limited establishing that even if main contractor has discharged service tax liability, it does not discharge sub-contractor of its independent obligation of paying tax on portion of consideration received by sub-contractor – Sub-contractor is essentially taxable service provider as services provided are used by main service provider for completion of work and does not alter fact of provision of taxable service by sub-contractor – Master Circular No. 96/7/2007-ST dated 23.08.2007 clarified that sub-contractor must discharge service tax liability while providing taxable service to main or principal contractor and cannot escape liability on plea that payment would amount to double taxation – However on issue of invocation of extended period of limitation, Department has not produced any substantive evidence to prove existence of ingredients for invoking extended period and in absence thereof cannot be said that appellant willfully suppressed facts to evade payment of tax – Issue of liability of sub-contractor to pay service tax was an interpretational issue which was settled by decision of Larger Bench and before that there were contradictory views – Extended period cannot be used against appellant in interpretational issues – The Show Cause Notice is time barred and demand is not sustainable – Impugned order modified to that extent – The appeal is allowed
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