2012 (11) TMI 975 - AT - Service Tax

Demand of service tax reimbursement of expenses - under the category of Manpower Recruitment & Supply Agency Service - denial of credit - separate Returns have not been filed as required under Rule 9(9) of CENVAT Credit Rules, 2004 Held that - the activities of the appellant may not deserve to be considered as supply of manpower but as rendering of information technology software service and in the light of the stay granted in the case of ASM Technologies Ltd. (2012 (11) TMI 974 - CESTAT, BANGALORE), the appellants are eligible for waiver of pre-deposit. As regards, the denial of CENVAT credit, we have not been shown that there is a requirement of filing separate Returns under Rule 9(9) of the CENVAT Credit Rules, 2004 and therefore, there is no warrant to order pre-deposit.-deposit As regards the reimbursable expenses relating to employees deputed to USA, undisputedly, the activities have taken place in USA and, therefore, the liability to service tax may not arise stay allowed

Summary

Issues:
1. Demand under "Manpower Recruitment & Supply Agency Service" and denial of credit under CENVAT Credit Rules, 2004
2. Demand under "Manpower Supply Service" for reimbursable expenses
3. Interest and penalties under various Sections
4. Time-bar for demand raised
5. Requirement of separate Returns for CENVAT credit

Analysis:
1. The appeal involved a total demand of around Rs.3.65 crores on two counts. One was a demand of Rs.1.82 crores under "Manpower Recruitment & Supply Agency Service," and the other was a denial of credit amounting to Rs.1.79 crores under CENVAT Credit Rules, 2004. The appellant argued that their activities were related to the development of software, not "supply of manpower," citing a previous stay order in a similar case. They also contended that the demand raised from April 2004 to September 2007 was time-barred and that separate Returns for CENVAT credit were not required as the necessary details were already provided in their ST-3 Returns as a service provider.

2. Another issue was a demand of about Rs. 60 lakhs under "Manpower Supply Service" for reimbursable expenses related to employees deputed to the USA. The appellant argued that since the activities took place outside India, the liability for service tax did not arise. The tribunal held that the activities may not be considered as "supply of manpower" but as "information technology software service," granting waiver of pre-deposit based on a previous stay order. They also ruled that there was no requirement for separate Returns under Rule 9(9) of the CENVAT Credit Rules, 2004, for which pre-deposit was not warranted.

3. The tribunal considered the submissions from both sides and held that the appellant's activities were more aligned with providing "information technology software service" rather than "supply of manpower." They also found no justification for the denial of CENVAT credit or the demand of service tax under "manpower supply service" for activities outside India. Consequently, they waived the pre-deposit of the dues and stayed the recovery until the appeals were disposed of, ultimately allowing both stay applications.