(2011) 23 STR 593 (Tri.-Kolkata) National Building Construction Corp. Ltd. v. CCEx. & ST, Patna.

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Sub-contracting — Business auxiliary services — Margins retained by main contractor cannot be considered to be consideration towards supervisory services rendered to sub contractors — Sub-contractors cannot be said to be rendering services to the principal on behalf of the main contractor. Facts National Building Construction Corp. Ltd. (‘NBCC’) entered into a contract with M/s. NTPC to undertake site preparation, site levelling works. NBCC in turn entered into a contract with M/s. APR Constructions Ltd. (‘APR’) and M/s. Sri Avantika Constructions (SAC). NBCC supervised the work done by APR and SAC as per the specifications given by NTPC. The Department demanded service tax along with interest and penalty from sub-contactors — APR as well as SAC holding that they had rendered business auxiliary services to NTPC on behalf of NBCC. The Department also demanded tax from NBCC on the ground that the margins earned by them were towards business auxiliary services (supervision) rendered to sub-contractors. The sub-contractors claimed that as per the Circular dated 14-7-1997, sub-contractors were not liable to pay service tax. APR and SAC had not rendered any services to NTPC and they did not receive any payments from NTPC directly. They were undertaking site formation activities and to treat that as business auxiliary service was absurd. It was also claimed by NBCC that just because they supervised the work, it could not be said that they rendered any services to the sub-contractors. The Revenue claimed that the Circular dated 14-7-1997 was over-ruled by another Circular dated 23-8-2007, which clearly stated that both the main contractor and the sub-contractor were liable to pay service tax. Held The supervision work was to ensure that the work was carried out as per the instructions of NTPC and thus, it cannot be said that NBCC rendered any services to the sub-contractors. The sub-contractors were rendering site formation service to NBCC and not business auxiliary services. Demands were set aside.