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CESTAT : Sub-contractor's liability independent of main contractor's obligation; No revenue neutrality vis-a-vis abatement

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  • CESTAT upholds service tax liability of sub-contractor engaged in rendering service of erection, commissioning and installation despite discharge of tax by main contractor;
  • Rejecting assessee’s contention that such levy would result in double taxation, CESTAT observes that main contractor has been granted abatement under Notification No. 1/2006-ST for the reason that it has foregone credit of duty paid on inputs and input services, while on the other hand, sub-contractors have already paid duty on value of their inputs and input services;
  • Accordingly, rules out applicability of revenue neutrality while stating that if assessee’s contention was accepted, every provision of service to another taxable service provider would not attract service tax, thus defeating the very purpose of Notification and leading to chaos;
  • States that earlier ruling in Akruti Projects is based on HC ruling in L&T Ltd in respect of VAT on works contract involving construction of land and therefore, is inapplicable to present case where assessee is not providing service to owner of land and there is no direct transfer of property from sub-contractor to main recipient of service; On the other hand, applies ratio of co-ordinate bench in Sunil Hi-Tech Engineers and remands matter for identification of documents required for quantification of the demand : Mumbai CESTAT
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