Construction Sub-Contractor Cannot Escape Service Tax Liability When Main Contractor Is Taxable: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that construction sub-contractor cannot escape service tax liability when main contractor is taxable. The Bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has stated that the construction of residential complexes was not exempt from service tax duty. Hence, the sub-contractors were liable to discharge their service tax liability on such services provided by them to the main contractor. The case involves the liability of assessee/M/s Rahul Agrawal, Damoh to pay service tax for providing construction services to M/s Agrawal Builders & Developers, Damoh (main contractor) The issue arose when the department identified that the appellant no.1, a sub-contractor, had not registered for service tax and had failed to pay the applicable service tax on payments received during the period from Financial Year 2012-13 to 2016-17. A show cause notice was issued, citing that payments received by the assessee for services provided to the main contractor were liable to service tax, as these payments fell under Section 66B of the Finance Act, and service tax of Rs.17,83,596/- was due for this period. The adjudicating authority dropped the service tax demand holding that the main contractor had paid service tax. The Commissioner (Appeals) set aside the order passed by adjudicating authority and held that the assessee must pay service tax if the main contractor is taxable. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal. The assessee contended that the sub-contractors were only agents of the contractor and the property in goods passed directly from the sub-contractors to the employer and therefore there can only be one Sale which is recognized by the legal fiction created under Sub-article (29A) of Article 366. Hence, there is only one taxable event of sale of goods in such a transaction. The Tribunal observed that after 1.7.2012, the services provided by Sub-contractor was exempted only if the services provided by the main contractor were exempted. If main contractor was liable to Service Tax, sub-contractor was also liable to Service Tax. The construction of residential complexes was not exempt from service tax duty. Hence, the sub-contractors, viz., Appellant no. 1 and appellant no. 2 were liable to discharge their service tax liability on such services provided by them to the main contractor viz., M/s Agarwal Builder and Developers, Damoh, added the bench. In view of the above, the Tribunal dismissed the appeal. Case Title: Shri Rahul Agarwal v. Commissioner CGST, Customs & Central Excise, Jabalpur Case Number: SERVICE TAX APPEAL NO. 50395 OF 2019 Counsel for Appellant/Assessee: Pradumna Singh Counsel for Respondent/Department: Anand Narayan Click Here To Read/Download The Order

Construction Sub-Contractor Cannot Escape Service Tax Liability When Main Contractor Is Taxable: CESTAT

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Construction Sub-Contractor Cannot Escape Service Tax Liability When Main Contractor Is Taxable: CESTAT

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INR 1099+GST

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