2012 (4) TMI 255 - AT - Service Tax

Plea for waiver of pre-deposit of duty of Rs 58.55 lacs, interest and penalty denial of credit of Service Tax paid on the taxable services of Manpower Recruitment or Supply Agency Service Held that - Taxable services availed of Yoga teacher, Poojari, Cook, Compounder, Nurse, helper etc. have no direct nexus with manufacture of final product. Credit rightly denied. Thus, assessee is directed to make pre-deposit of Rs 15 lacs within stipulated time subject to which pre-deposit of the balance amount of duty, interest and penalty shall stand waived and recovery thereof stayed during pendency of the appeal.

Summary

Issues:
- Denial of credit of Service Tax on taxable services of Manpower Recruitment or Supply Agency Service
- Interpretation of the definition of input service under the Cenvat Credit Rules, 2004
- Nexus of supplied manpower with the manufacture of final product

Analysis:
The judgment by the Appellate Tribunal CESTAT, MUMBAI involved the issue of denial of credit of Service Tax on taxable services of Manpower Recruitment or Supply Agency Service. The applicant sought a waiver of pre-deposit of duty, interest, and penalty amounting to Rs.58,55,434/-, as the demand was confirmed after denying the credit of Service Tax. The denial was based on the argument that the taxable services were not used in or in relation to the manufacture of dutiable final products, as per the definition of input service under rule 2 of the Cenvat Credit Rules, 2004.

The contention put forth was that there was no dispute regarding the receipt of taxable services by the appellant, and the manpower supplied was necessary for use in or in relation to the manufacture of the final product. The Revenue, on the other hand, argued that certain manpower such as Yoga Teacher, Poojari, Cook, Compounder, Nurse, Helper, etc., had no direct nexus with the goods manufactured, justifying the denial of credit.

After considering the facts and circumstances of the case, the Tribunal found that the appellant had indeed availed taxable services, but the supplied manpower like Yoga Teacher, Poojari, Cook, Compounder, Nurse, Helper, etc., did not have a direct nexus with the manufacture of the final product. Consequently, the Tribunal directed the appellant to deposit an amount of Rs.15 lakhs within six weeks. Upon depositing this amount, the pre-deposit of the remaining duty, interest, and penalty would be waived, and the recovery thereof stayed during the pendency of the appeal.

The judgment emphasized the importance of establishing a direct nexus between the supplied manpower and the manufacture of the final product to justify the credit of Service Tax. The decision highlighted the need for compliance by a specified date and provided a clear directive regarding the deposit and waiver of the duty amount.