Conflicting rulings on subcontractor liability bar invoking the extended limitation period for service tax demands.

The appellant, a registered service-tax assessee, provided whitewashing, distempering and painting services as a sub-contractor on buildings at RAPS Colony, Rawatbhata.

She did not pay service tax, believing that the main contractor’s payment discharged the tax liability.

A show-cause notice proposed a demand of ₹11,60,128, and the adjudicating and appellate authorities confirmed demand and penalties, although the judgment records differing demand figures at different points.

The appellant challenged the appellate order before the Tribunal, principally contesting invocation of the extended limitation period on account of the prior uncertainty about sub-contractors’ liability.

Whether a sub-contractor was liable to pay service tax where the main contractor had paid tax on the relevant service.

Whether the extended period of limitation could be invoked given the prior conflicting decisions concerning a sub-contractor’s service-tax liability.

The Tribunal treated the Larger Bench decision in Commissioner of Service Tax, New Delhi v. Melange Developers Pvt. Ltd., 2020 (33) G.S.T.L. 116 (Tri.-LB), as settling the merits: a sub-contractor is liable to pay service tax even if the main contractor has paid tax.

The demand and extended limitation were considered under Section 73(1) of the Finance Act, 1994, including its proviso permitting an extended period in specified circumstances.

The Tribunal relied on earlier decisions addressing the same liability dispute and limitation, including S. Gupta & Contracts India Pvt. Ltd., Essem Erectors, Synergy Engineers Group Pvt. Ltd., M.K. Ghori & Associates and Rigtech Power, as support for not applying the extended period where uncertainty existed.

The Tribunal considered the merits no longer open for dispute in light of Melange Developers, and therefore accepted that the appellant, as a sub-contractor, was liable to pay service tax.

It separately found that earlier decisions had created confusion over whether a sub-contractor had to pay tax when the main contractor had already paid it.

In view of that uncertainty and the Tribunal’s decisions in similar cases, it held that the extended limitation period could not be sustained; the demand could stand only for the normal period.

It modified the impugned order accordingly and allowed the appeal to that extent.