2011 (8) TMI 879 - AT - Service Tax

Stay petition - the liability to pay ESI and EPF is on the principal employer who is discharging that liability and we do not see any reason to treat this as consideration for the appellant for providing the service on man power supply services - Decided in favor of the assessee

Summary

Issues:
1. Whether the contribution towards EPF and ESI made by the principal employer should be included in the gross value received by the appellants for service tax payment in man power supply services.

Analysis:
The issue in this case revolves around the inclusion of the contribution towards EPF and ESI made by the principal employer in the gross value received by the appellants for service tax payment in man power supply services. The appellants were supplying manpower to a company and paying service tax on the gross value received. The Revenue contended that the amount deposited by the principal employer towards EPF and ESI for each employee was not included in the gross value received by the appellants for service tax payment.

The appellants argued that as per relevant laws, the liability to deposit EPF/ESI lies with the principal employer, and they are not receiving these amounts. They maintained that there is no justification to consider this amount as part of the consideration received by them for supplying labor. On the other hand, the Revenue referred to a circular stating that contributions to EPF and ESI should be part of the value on which service tax is paid. However, the appellants cited a subsequent circular that overruled previous circulars related to valuation.

After considering the arguments from both sides, the tribunal found that the liability to pay EPF and ESI rests with the principal employer, who is fulfilling this obligation. Consequently, the tribunal concluded that there is no basis to treat these contributions as consideration received by the appellants for providing manpower supply services. Therefore, the tribunal held that the appellants had established a strong prima facie case for the waiver of dues arising from the impugned order. As a result, the tribunal decided to waive such amounts and stayed their recovery during the pendency of the appeals.

In summary, the tribunal's decision focused on the interpretation of whether the contributions towards EPF and ESI made by the principal employer should be considered part of the gross value received by the appellants for service tax payment in man power supply services. The tribunal ruled in favor of the appellants, emphasizing that the liability for EPF and ESI lies with the principal employer and should not be treated as consideration received by the appellants for their services.