14 March 2012
M/S X & Co is Princpal M/S Y & Co is Contractor M/S Z & Co is Sub-contractor.
M/S Y & Co providing services of Hiring of Equipment to X & Co and charging Service Tax under the category (Supply of Tangible goods use services" . In the Contract it is clarly mention that Service Tax will be paid only production of prrof of payment of service Tax Challan. No Cenvat crdit will not be availed by contract as because princpal will pay only challan amount.
Y & Company again subcontrcat some portion of services to Z & Coompany.
My Question is : Will Z & Company will charge service Tax to Z & Co.
If yes, Then it will be double taxation as M/S Y & Co. made the entire service tax amount to the dpartment for claiming remibursemet from princpal.
Please suggest us and provide us necessary circular
15 March 2012
I guess Y & Co. if a Government Contractor.
Legally speaking, the condition of reimbursement of challan amount is illegal and hence void. Contract between two parties can not override a statutory provision.
Again, Z & Co. is duty bound to charge Service Tax, as law does not distinguish between Contractor and Sub Contractor.
Option will be to intimate the department jointly by Y & Co. and Z & Co.
The Tribunal as well as Allahabad High Court has held such practice to be improper. In fact The Hon'ble High Court has directed the Prinicpal to pay the amount of interest as well.
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