FURNACE FABRICA (INDIA) LTD. Vs. JOINT COMMISSIONER, OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX

JUDGEMENT

(1.) The petitioner Company was awarded with a civil contract work by the 3rd respondent, for a total contract amount of Rs.15,79,93,560/ -. The petitioner sub contracted the civil and plumbing works under the above said contract to the 4th respondent, for an amount of Rs.13,12,84,710/ -. Issue involved herein pertains to levy of service tax. Ext.P3 invoice would indicate that service tax was levied on the bill raised by the petitioner on the 3rd respondent. Therefore the petitioner took a stand that no service tax need be levied on the bill raised by the 4th respondent on the petitioner. The 4th respondent thereupon sought clarification from the 2nd respondent as to whether there will be any service tax liability on the 4th respondent, because the petitioner Company is remitting service tax for the entire contract work. Ext.P6 clarification was issued by the 1st respondent in this regard. Referring to Ext.P8 Master Circular it was clarified that the sub - contractor is providing service in the nature of 'input service' and therefore service tax is leviable on any taxable service provider. It was clarified that service tax is liable to irrespective of whether the services are provided by a persons in his capacity as sub -contractor or not. It is mentioned that taxable services intended for use as ' input service' by another service provider will not alter the liability of service tax with respect to the service provider. The petitioner is challenging Ext.P6 clarifications and seeking appropriate direction restraining respondents 1 and 2 from directing the 4th respondent to charge service tax in respect of the service provided under Ext.P2 sub -contract agreement. Inter alia Ext.P8 is also challenged to the extent to which it insist levy on the sub -contractor, in cases where the principal contractor pays the service tax on the whole amount.

(2.) Learned counsel had placed reliance on Ext.P4 decision of the Appellate Tribunal (CESTAT), New Delhi. In the said decision the Tribunal had opined that the Central Board of Excise and Customs had taken the view earlier through its circular dated 7.10.1998 that, a sub contractor should not be brought in the ambit of liability of tax and the liability will be on the principal contractor. But it is noticed that the Board has changed its view through Ext.P8 Master Circular, in view of the credit made available under the Cenvat Credit Rules, 2004. The case decided under Ext.P4 pertains to the Master Circular period prior to 23.8.2007. However, the Tribunal observed that if it is proved from the records on verification that the principal contractor had discharged the tax liability in respect of the contract, cascading affect should be avoided and they are entitled to refund.

(3.) Contention of the petitioner is that since major portion of the work was sub -contracted to the 4th respondent, the recipient of the service is the 3rd respondent who is the awarder of the work. Therefore no tax liability can be fetched against the 4th respondent is the contention. Per contra, learned Standing Counsel for CBEC contended that service provided by the sub contractor is in the nature of 'input service', which is specifically defined in the statute. Relying on Ext.P8 Circular it is contended that the Board is authorized to issue circulars prescribing the method of levy of tax. Since the service provided by the sub -contractor is in the nature of 'input service', which is used by the main service provider for completion of the work undertaken by him, the 4th respondent cannot be exonerated from the liability fetched upon him in the capacity as service provider. He is always liable to comply with the requirements of filing returns and for paying tax. Even if the petitioner had discharged the entire liability, only a credit can be claimed under the provisions of the Cenvat Credit Rules, is the contention.