Demand of service tax cannot be raised when the tax liability has already been discharged under RCM

The CESTAT, Ahmedabad in the case of Utility Labour Suppliers v. Commissioner of C.E.-Ahmedabad-II [Service Tax Appeal No. 10780 of 2022-DB dated November 26, 2024] held that demand of service tax cannot be raised when the tax liability has already been discharged under RCM.

Facts:

Utility Labour Suppliers ("the Appellant") was issued a Show Cause Notice dated April 23, 2021 ("the SCN") wherein the demand of Service Tax has been proposed along with interest and penalty, alleging that the total sales of services as declared in ITR/Form 26AS was not equivalent to gross value of services as declared in ST-3 returns, and the amount of the demand was proposed of the differential amount. The said demand was affirmed in the Order-in-Original dated July 04, 2022 ("the Impugned Order").

Aggrieved by the Impugned Order, the Appellant filed an appeal before the tribunal.

Issue:

Whether demand of service tax can be raised when the tax liability has already been discharged under RCM?

Held:

The CESTAT, Ahmedabad in the case of Service Tax Appeal No. 10780 of 2022-DB held as under:

• Observed that, as per Notification No. 30/2012-ST dated June 20, 2012 as amended vide Notification No. 7/2015 -ST dated March 1, 2015, the Recipient of Manpower Supply Service, is liable to pay service tax from the aforesaid date. Earlier, Service provider on the said service was liable to pay 25 percent service tax on the service supplied and rest of the service tax liability was discharged by the Recipient
• Noted that, the Pharma Company being recipient of service, discharged whole tax liability considering it as activity of labour/manpower supply.
• Opined that, the Department has erred in issuing the order on account of fact that the service tax liability has already been discharged and the demand of service tax from the Appellant would lead to double taxation.
• Held that, the Impugned Order is set aside.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED