FINAL ORDER NO. 51248/2026

PER: MS. BINU TAMTA

Challenge is to the impugned order¹Order-in-Appeal No. RPR-EXCUS-000-APP-225-24-25 dated 25.07.2024, allowing the appeal filed by the Revenue against the dropping of the demand by the Assistant Commissioner holding that once the principal contractor has paid the service tax, the sub-contractor is not liable to pay tax.

The appellant is engaged in trading of goods and also providing repair and maintenance services. The receipt of the data from the Income Tax Department, led to the issuance of Show Cause Notice dated 22.10.2019 raising the allegation that for the Financial Year 2015–16 and 2016–17, there is only sale whereas during Financial Year 2014–15 the appellant provided services. The Adjudicating Authority, vide Order dated 06.02.2023 dropped the proceedings, however, on appeal by the Revenue, the Commissioner (Appeals) allowed the appeal. Hence, the present appeal.

The Ld. Counsel for the appellant has raised twofold issues:

i) Whether the sub-contractor (appellant) is liable to pay service tax when the main/principal contractor paid the tax.

ii) Whether the extended period of limitation under Section 73(1) proviso of the Finance Act, 1994, The Act can be invoked as there were divergent views of the Tribunal.

The issue on merits regarding the liability of sub-contractor to pay service tax when the main/principal contractor has paid the tax has been decided by the Larger Bench of the Tribunal in the case of CST New Delhi vs Melange Developers Pvt. Ltd.²2020 (33) GSTL 116 (Tri.–LB) holding that, even if the main contractor has discharged the service tax liability, it does not discharge the sub-contractor of its independent obligation of paying the tax on the portion of consideration they received. In that view, the appellant is liable to pay the service tax, accordingly.

On the issue of invocation of the extended period of limitation, the Ld. Counsel submitted that the Tribunal in identical cases involving the same issue has held that extended period of limitation cannot be invoked as on merit, the Tribunal has passed divergent orders. He relied on the following decisions as under:

(a) Commissioner of Service Tax, New Delhi vs. M/s. S. Gupta & Contracts India Pvt. Ltd.⁴2023 (3) TMI 439 – CESTAT New Delhi

(b) Essem Erectors vs. CCE, Nagpur⁵2025 (1) TMI 143 – CESTAT Mumbai

(c) Rigtech Power vs. CCE & ST, Dibrugarh⁶2026 (2) TMI 433 CESTAT Kolkata

On the contrary, the Ld. AR has referred to the Master Circular No. 96/7/2007–ST dated 23.08.2007, clarifying that sub-contractor is essentially a taxable service provider as the services provided are used by the main service provider for completion of his work and does not in any way, alter the fact of provision of taxable service by the sub-contractor. He therefore submitted, that it was emphatically clear that sub-contractor must discharge his service tax liability while providing taxable service to the main or principal contractor and cannot escape the liability on the plea that the payment made by them would amount to double taxation.

Considering the rival submissions on the issue of invoking the extended period, I am of the view that the issue of applicability of extended period of limitation has already been settled in catena of decisions. Perusal of the Show Cause Notice reveals that the Department has not produced any substantive evidence to prove the existence of the ingredients of invoking the extended period of limitation and in absence thereof, it cannot be said that the appellant has willfully suppressed the facts to evade the payment of tax. Secondly, I find that the issue as to the liability of the sub-contractor to pay service tax was settled by the decision of the Larger Bench and before that there were contradictory views. It being an interpretational issue, the extended period cannot be used against the appellant. Moreover, as submitted by the Ld. counsel, the Tribunal in identical cases