2015 (7) TMI 1096 - AT - Service Tax

Demand of Service tax - Manpower Recruitment or Supply Agency - Appellant contended that it was only entitled to 5% service charges on actual payment made to labour by SZDUSSL and on such service charges, the service tax has already been deposited. No suppression or wilful mis statements and it was its bona fide belief that the service tax was being rightly discharging by it. Held that - it is not in dispute that the gross amount charged for the service was inclusive of the amount of payment made to the labourers and therefore the service tax is leviable on such gross amount and not merely on the amount of commission to which the appellant was entitled. The C.B.E.& C. s view is also in conformity with this view as is evident from its Circular No. B1/6/2005-TRU, dated 2-7-2005. Invokation of extended period of limitation - time bar - Held that - in view of the special facts and circumstances of this case, we are of the view that adequate ground exists to sustain the contention of the appellant that there was no wilful suppression or mis-statement of facts on its part with the intention to evade service tax. The entire demand pertains to the period beyond the normal period of one year and hence is hit by time bar. Therefore, the demand is set aside. - Decidde in favour of appellant

Summary

Issues:
1. Service tax demand for the period 2005-2008 based on "Manpower Recruitment or Supply Agency" service.
2. Dispute over the value of taxable service and applicability of service tax.
3. Allegations of suppression of facts by the appellant.
4. Time bar for invoking the extended period.

Analysis:

1. The appeal challenged a service tax demand for the period 2005-2008 related to providing "Manpower Recruitment or Supply Agency" service. The appellant argued that it was entitled to a 5% service charge on labor payments, on which service tax was already deposited. The disagreement arose from the interpretation of the agreement with the service recipient, SZDUSSL, regarding the taxable amount.

2. The dispute centered around the value of the taxable service and the applicable service tax. The agreement between the appellant and SZDUSSL specified a 5% commission to the appellant, with reimbursement of service tax on that commission only. However, Section 67 of the Finance Act, 1994 mandates service tax on the gross amount charged by the service provider, inclusive of labor payments. The Circular No. B1/6/2005-TRU further supported this view, emphasizing that service tax is leviable on the full consideration for manpower supply.

3. The Departmental Representative alleged suppression of facts by the appellant for not responding to letters and obtaining information from SZDUSSL. However, the appellant's payment of service tax on the commission received, along with producing evidence of such payments during the hearing, indicated a lack of intent to evade tax. Citing legal precedents, the tribunal concluded that the appellant's actions did not constitute wilful suppression or misstatement of facts.

4. Regarding the time bar issue, the Commissioner invoked the extended period due to alleged suppression of taxable service facts by the appellant. However, the tribunal disagreed, noting that the appellant's belief in charging service tax only on the commission received, supported by payment evidence and ST-3 returns, did not demonstrate deliberate suppression. Relying on legal interpretations, the tribunal held the demand beyond the normal one-year period as time-barred and set aside the appeal in favor of the appellant.

In conclusion, the tribunal ruled in favor of the appellant, setting aside the service tax demand based on the analysis of the taxable service value, absence of wilful suppression, and the time bar limitation. The assistance provided by Shri Yogendra Adlak was acknowledged before concluding the judgment.