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Tuesday, September 18, 2012

In a sub-contract the service tax payable is only once and cannot be collected twice i.e from Contractor as well as from sub-contractor

Summary: In the light of the decision in case of Viral Builders v. CCE [Final Order Nos. A/1839-1840/2010-WZB/Ahd. dated 9-11-2010, it has been held that in a sub-contract service tax liability is payable only once and cannot be collected twice i.e. from contractor as well as from sub-contractor.  

Harsh Constructions
Commissioner of Central Excise, Surat*


ORDER NO. A/830/WZB/AHD OF 2012 S/975/WZB/AHD OF 2012


APPEAL NO. ST/474 OF 2011

JUNE 7, 2012


Mr. M.V. Ravindran, Judicial Member - This stay petition is filed for the waiver of pre-deposit of service tax of Rs. l,28,02,156 with interest and penalties imposed under various sections of Finance Act, 1994.

2. The above said amounts have been confirmed by the adjudicating authority, on the ground that appellant is liable to pay service tax on the free materials i.e. cement, steel etc. received by them from the M/s. Reliance Industries to the main contractor M/s. Viral Builders.

3. After hearing both sides for some time on the stay petition, we find that the appeal itself could be disposed of at this juncture. Hence, we allow the stay petition and waive the condition of pre-deposit of amounts involved and take up the appeal for disposal.

4. Learned counsel would submit that the appellant is a sub-contractor of M/s. Viral Builders. It is his submission that M/s. Viral Builders was awarded a contract for executing a project given by M/s. Reliance Industries and M/s. Viral Builders has discharged the service tax liability on the entire contract awarded to them by M/s. Reliance Industries and as such, the current appellant is not required to discharge any service tax liability. He would also submit that the service tax liability which has been discharged by them on the bills raised by M/s. Viral Builders, has been claimed as a refund only on the ground that the appellant being a sub-contractor, is not liable to pay the service tax as M/s. Viral Builders has already discharged the entire service tax liability. In support of this contention, he brings to our notice the Judgment of this Bench in the case of Viral Builders v. CCE [Final Order Nos. A/1839-1840/2010-WZB/Ahd. dated 9-11-2010 wherein the Bench has held that service tax liability for the services rendered will be discharged at one point and cannot be paid by two different persons for the same contract.

5. Learned SDR would submit that there is nothing on record to show that the contract which was entered by Viral Builders and sub-contractor to the appellant was the same and Viral Builders has discharged the service tax liability on the entire contract.

6. After careful considering the submissions, we find that the judgment of the Tribunal in the case of Viral Builders (supra), indicates that the issue is one and the same and we have remanded the matter back to the adjudicating authority with following findings:

5. There is a fallacy in above reasoning of Commissioner (Appeals). The same service for which the contractor has procured an order, does not stand actually provided by him but is passed on to sub-contractor, who provided the actual service, it cannot be said that the contractor is liable to pay duty on the same. Service definitely stands provided only once. As such by no stretch of imagination service tax in respect of the same service can be paid for the second time. It Is not a case where the service provided by sub-contractor is further used by hint for providing services to his buyers. As such, the example of inputs being used in the final product and both livable to excise duty is not apt.

7. We take on record the responsible statement made by the Senior Advocate that the issue involved in this case and in the case which has been remanded back to the adjudicating authority is one and the same and in respect of the contract which has been awarded by M/s. Reliance Industries to M/s. Viral Builders. At this juncture, we find that this appeal has to be allowed by way of remand to the adjudicating authority to reconsider the issue afresh along with the issue of M/s. Viral Builders.

8. In view of the above, without expressing any opinion on the merits of the case, keeping all the issues open, we set-aside the impugned order and remand the matter back to the adjudicating authority to reconsider the issue after following the principles of natural justice.

The appeal is allowed by way of remand.

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