2010 (10) TMI 491 - AT - Service Tax

Waiver of pre-deposit - Manpower Recruitment or Supply Agency s Service or Information technology service - The appellants contention is that the service rendered is in the nature of software development and maintenance activity and not the manpower supply activity - Held that Nature of services can not be decided on the basis of registration certificate - The nature of service rendered by the assessee is a question of fact decided on the basis of actual nature of service to be ascertained on the basis of the evidence collected in that regard. - Appellant directed to deposit balance amount of service tax pre-deposit of interest and penalty waived.

Summary

Issues Involved:
1. Classification of services rendered by the appellants.
2. Bar of limitation and invocation of the extended period of limitation.
3. Justification for penalties imposed under various sections of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services Rendered by the Appellants:
The primary issue in this case is whether the services rendered by the appellants fall under "Manpower Recruitment or Supply Agency's Service" or "Information Technology Software Services." The Commissioner concluded that the appellants were engaged in recruiting graduates, training them, and then deploying them to clients based on mutual agreements. These professionals worked under the clients' directions, which led to the classification of the services as "Manpower Recruitment or Supply Agency's Service." The appellants argued that their services were related to software development and maintenance, not manpower supply. They pointed out that since 2008, they had been certified for Information Technology software services and had been paying service tax accordingly. However, the tribunal found that the nature of services must be determined based on evidence for each specific period, not merely inferred from later registrations or certifications.

2. Bar of Limitation and Invocation of Extended Period of Limitation:
The appellants contended that the show-cause notice issued on 29-4-2008 for the period from 16-6-2005 to 4-10-2007 was barred by limitation. They argued that the Department was aware of their services since January 2007, making the invocation of the extended period of limitation inappropriate. The Commissioner, however, justified the extended period, stating that the appellants had not registered, filed returns, or disclosed their activities to the Department until specific intelligence and subsequent investigations revealed the evasion of service tax. The tribunal upheld this view, noting that the facts were suppressed intentionally to evade tax, and thus, the extended period was rightly invoked. The tribunal also referenced the Supreme Court's decision in Kushal Fertilisers Pvt. Ltd., which emphasized that the extended period could be invoked if suppression of facts was established.

3. Justification for Penalties Imposed:
The Commissioner imposed various penalties on the appellants, including Rs. 100 per day up to 18-4-2006, thereafter Rs. 200 per day or 2% of the service tax payable per month, whichever is higher, a penalty of Rs. 1,000 under Section 77, and an equal amount under Section 78 of the Finance Act, 1994. The appellants argued that their classification dispute was not properly appreciated, which could affect the penalties. The tribunal noted that the classification issue could be addressed during the appeal on merits. However, for the purpose of the stay application, the tribunal directed the appellants to deposit the balance amount of service tax demanded while waiving the interest and penalties, indicating a prima facie case for partial relief.

Conclusion:
The tribunal concluded that the appellants did not make a prima facie case for a total waiver of the demanded amount. They were directed to deposit the balance service tax within eight weeks, while the interest and penalty amounts were waived for the stay application. The tribunal emphasized that these observations were preliminary and specific to the stay application, with the merits of the appeal to be addressed separately.