Levy Service tax on Sub contract canal works

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Paresh Vasani (Querist)
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09 February 2023 I have one doubt about the levy of service tax on sub-contract works towards constructing branch canal/dam works around 11 km.

Let's briefly narrate hereunder for the pattern of works :

Sardar Sarovar Narmada Nigam Limited (Government Undertaking company) allotted said works to "A" who is the main contractor amounting to Rs. 750.00 lakhs (which is exempt from service tax as such works are government works), and, some portion of said works extent to Rs. 500.00 lakhs had sub-contracted to "B" who is the sub-contractor from the main contractor with executed necessary work order, wherein the liability of service tax mentioned as aforesaid works are failing under negative list and exempted from the service tax as per notification No. 25/2012, dated. 20/06/2012 .

Now, The service tax scrutiny is ongoing and the final SCN issued by the officer alleged as you are not entitled to take any exemption benefit with said notification for aforesaid works after considering our submission of all documentary evidence and explanation as well. The main core allegation by the officer is the service tax applicable in hands of "B" sub-contractor as he provided service to a private (personal) contractor, not directly to a government company, however, the Main Contractor 'A" is entitled to get exemption of such notification as he had provided service to direct government undertaking company for aforesaid works is not for public uses such like road, airport etc.

During the personal hearing of the such matter, the officer strictly denied the above exemption and said that the said notification does not apply to the sub-contractor even though he works canal works.

We will make plans to reply of SCN withstand that service tax liability is exempt for us as already mentioned in the work order which issued by the Main Contractor, so is it enough or any other points require in defense to prevent such liability?

Sir, kindly guide me in this regard, your positive and speedy approach would be highly appreciated.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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09 February 2023
The answer to the above question is being provided under serial No. 29 sub-clause (h) of the mega Notification, which provides that service provided by following person in respective capacities are exempt from service tax : (h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt[Notification No. 25/2012-ST, dated 20.06.2012]