Case Details: MKB Power Construction Pvt. Ltd. Versus Union of India (2025) 30 Centax 167 (Pat.)
Judiciary and Counsel Details
- Rajeev Ranjan Prasad & Ramesh Chand Malviya, JJ.
- Shri Rahul Kumar, Adv. for the Petitioner.
- S/Shri Anshuman Singh, Sr. SC & Shivaditya Dhari Sinha, AC to ASG for the Respondent.
Facts of the Case
The petitioner received a sub-contract work order from the respondents, who had originally been awarded the main contract by Bihar State Power Transmission Company Limited. This work was carried out between April 2016 and June 2017. After the petitioner completed the services under this sub-contract, the tax department issued a show cause notice alleging that the petitioner had provided taxable services without paying the required service tax under Section 65B of the Finance Act, 1994.
Following this, the department passed an order demanding service tax along with interest and penalties. The petitioner challenged this order before the High Court by filing a writ petition, arguing that as a sub-contractor acting as an agent of the main contractor (the respondents), it did not have a direct contract with the contractee. The petitioner further contended that charging service tax on both the main contractor and the sub-contractor for the same work would amount to double taxation, which is not permissible under the law.
High Court Held
The Hon’ble High Court held that even if the service is provided as an input for another service provider, the sub-contractor cannot be absolved of its liability to pay service tax. The Court explained that under the CENVAT credit mechanism, the sub-contractor’s services may be treated as input services for the main contractor if there is integration between the services, allowing the contractor to claim credit for the tax paid by the sub-contractor. However, this does not remove the sub-contractor’s independent obligation to pay service tax on the services it provides.
The Court also noted that the absence of a direct contract between the sub-contractor and the contractee does not exempt the sub-contractor from service tax liability under Sections 65B, 66D, and 73 of the Finance Act, 1994. While the Court emphasised that the government cannot benefit from double taxation, it upheld the order imposing service tax, interest, and penalties on the petitioner as fully valid and lawful. Therefore, the petitioner’s petition was dismissed.
List of Cases Cited
- Asstt. CCE v. Dunlop India Ltd. — 1984 taxmann.com 492 (SC) — Referred [Para 10]
- Larsen And Toubro Limited v. State of Andhra Pradesh — (2006) 148 STC 616 (AP) — Referred [Para 8]
- Larsen and Toubro Ltd. v. CCE — 2019 (26) G.S.T.L. 83 (Tri.-Del) — Referred [Para 19]
- State of Andhra Pradesh v. Larsen and Toubro Ltd — 2008 taxmann.com 1809 (SC) — Referred [Para 8]
- Tata Engineering and Locomotive Co. Ltd. v. Asstt. CCTes — AIR 1967SC 1401 — Referred [Para 10]
