In Service Tax Appeal No. 77107 of 2018- CESTAT - M/s Dipak Paul provided services to Tripura Housing and Construction Board; No Service Tax liability under RCM for Tripura State Cooperative Bank Ltd.: CESTAT (Kolkata)
Member Rajeev Tandon (Technical) [18-05-2023]

Read Order: M/s. Tripura State Co-Operative Bank Limited v. Commissioner of Central Excise & Service Tax, Shillong

LE Correspondent

Kolkata, May 25, 2023: The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that as there was no relationship between Tripura State Cooperative Bank Ltd, Agartala (TSCBL) and M/s Dipak Paul as a service receiver and a service provider for the impugned works order, TSCBL was not liable to pay service tax.

Briefly stated facts of the case were that TSCBL (appellants), registered under banking and financial services, awarded contract for construction of a multi-storied building for the bank purpose to Tripura Housing and Construction Board, Agartala (THCB).  THCB further subcontracted the construction of the building to M/s. Dipak Paul. By virtue of Reverse Charge Mechanism (RCM) for payment of service tax, vide notification 30/2012 ST (Sr. No. 9 of the table) dated 20.06. 2012, the service provider, was liable to pay 50% of the tax, while the balance 50% was required to be paid by the service receiver. The Commissioner (Appeals) vide his order, fastened the balance liability on the appellants, stating that upon completion of the construction of the building, THCB had handed over the building to the appellants who upon getting possession of the said building released all funds due as per contract to THCB, and the fact that the appellants were using the said office building, evidenced that the appellant fell into the bracket of being the end user/beneficiary/ultimate recipient of the service, and therefore they were required to pay the balance 50% of service tax as recipient of service in terms of the Notification.

The single-member bench of Rajeev Tandon (Technical) stated that the determination of a service receiver and service provider can be established by examining who is paying as a client and who is receiving payment as a service provider. The bench concluded that M/s Dipak Paul had provided services to THCB and not to the appellants. Therefore, under the RCM, it was the responsibility of both THCB and M/s Dipak Paul to equally pay the applicable service tax.

The bench further observed, “The mere fact that the appellant are making use of the said building and have moved their office into the same is not the test for the delivery of the service. The end user status/ultimate recipient of service test cannot therefore be interpreted to fix TSCBL as the service recipient directly from M/s Dipak Paul. It is undisputed that M/s Dipak Paul has been engaged at the behest of THCB. There is no contract evidencing engagement of Dipak Paul by TSCBL.”

The bench concluded that M/s Dipak Paul had provided the services to THCB, who as per law was eligible to avail credit of the tax paid by M/s Dipak Paul as input service credit. Therefore, it was THCB who was responsible for discharging the service tax liability, and no liability by way of RCM was applicable to the appellant.