2009 (2) TMI 697 - AT - Service Tax

Summary

Issues involved: Demand of service tax on the appellant for the period 16-6-2005 to 31-3-2006 for alleged "manpower recruitment or supply agency" service to a sugar factory.

Summary:

Issue 1: Tax liability on the appellant for alleged service provision
The Appellate Tribunal examined the records and found a demand of service tax on the appellant for the period in question, based on the contention that the appellant was providing "manpower recruitment or supply agency" service to a sugar factory. It was observed that the appellant was engaged by the sugar manufacturer to cut sugar cane and deliver it to the factory, with the workers being employees of the appellant and not the sugar manufacturer. Despite the prima facie view that the appellant was fulfilling a contract for the sugar manufacturer rather than providing a taxable service, the appellant had paid over Rs. 21 lakhs in service tax as per the department's direction.

Issue 2: Waiver of pre-deposit and stay of recovery
Considering the circumstances and the Supreme Court's judgment in Monotosh Saha v. Special Director, Enforcement Directorate 2008 (229) E.L.T. 492 (S.C.), which discussed the concept of "undue hardship" in relation to pre-deposit of penalty amounts, the Appellate Tribunal decided to grant waiver of pre-deposit and stay of recovery concerning the penalty and interest on tax. The Tribunal emphasized that directing the appellant to pre-deposit the penalty amount would cause undue hardship, especially since the appellant was not found to be providing the taxable service in question to the sugar factory.

In conclusion, the Appellate Tribunal granted waiver of pre-deposit and stay of recovery in relation to the penalty and interest on tax for the appellant in this case.