CESTAT, NEW DELHI BENCH
DNS Contractor (vs.) Commissioner of Central Excise, Delhi-I
Section 65(25b), read with section 66 of the Finance Act, 1994 – Taxable services – Commercial or Industrial Construction Services – Assessee, a sub-contractor, did not pay service tax on services provided to main contractor, as full service tax had been paid by main contractor – Department argued that after introduction of CENVAT Credit Rules, 2004, all persons are liable to pay service tax on services provided by them with Cenvat credit benefit, if any –
HELD : During relevant period, there was practice of contractors to pay service tax on full value; hence, separate confirmation of demand against sub-contractors would be unjustified, even if Cenvat credit rules may require otherwise – Where :
(a) principal contractor has paid tax on entire value,
(b) Revenue has already earned its share of tax whether coming from main contractor or from sub-contractor;
(c) earlier clarifications of Board and judgments of Tribunal also favoured sub-contractors;
(d) concept of service tax was still not clear;
(e) this was a general practice/pattern in industry;
(f) ex-chequer cannot be enriched on account of double taxation and
(g) entire situation is revenue neutral; hence, demand was set aside – Matter was remanded to verify whether main contractor had paid tax on full value [Paras 4 to 6] [In favour of assessee/Matter remanded]
Section 86 of the Finance Act, 1994 read with section 35C of the Central Excise Act, 1944 and section 129B of the Customs Act, 1962 – Appeals – Orders of – Appellate Tribunal – Department argued that Tribunal cannot set aside demand on sub-contractors contrary to mandate of CENVAT Credit Rules, 2004 and cannot takeaway powers of Legislation
HELD : No provisions of rules stand introduced by Tribunal in Cenvat Credit Rules – Only based upon interpretation of provisions of Cenvat Credit Rules as also equity in tax as also on issue of revenue neutrality, demand was set aside [Para 5] [In favour of assessee]
Section 73 of the Finance Act, 1994 read with sections 11A and 33A of the Central Excise Act, 1944 and section 28 of the Customs Act, 1962 – Recovery – Of duty or tax not levied/paid or short-levied/paid or erroneously refunded – Adjudication of Demand – Where principal contractors had paid service tax on full value, demand cannot be enforced on sub-contractors and any such demand is barred by principal of revenue neutrality [Paras 4 and 5] [In favour of assessee]