2013 (6) TMI 564 - AT - Service Tax

Sharing of manpower between group companies - reimbursement of the expenditure - Levy of service tax - Business Auxiliary Services - Held that - After examining the memorandum of ASSOCIATION of the appellant company and the group of companies, prima facie it appears to be a case of recruiting staff for the group companies and supplying them to the group companies to deal with the activities undertaken by the group companies. Such an activity does not, prima facie, come under the purview of the Business Auxiliary services as defined under Section 65 (90) of the Finance Act, 1994. - prima facie view that the appellant has made out a case in their favour for grant of stay. - stay granted.

Summary

Issues:
- Whether the services rendered by the appellant fall under "Business Auxiliary Services"?
- Whether the reimbursable expenses received by the appellant should be added to the taxable value of the service?
- Whether the appellant is eligible for a stay on the recovery of dues adjudged against them?

Analysis:

Issue 1: Services falling under "Business Auxiliary Services"
The appellant, a real estate company, was found to be engaged in recruitment and supply of manpower for group companies, reimbursed for salaries and administrative expenses, and charged a monthly sum for services rendered. The department issued show-cause notices demanding service tax under "Business Auxiliary Services." The appellant argued that they were not promoting group services but recruiting staff for group companies, hence not falling under Business Auxiliary Services. The Tribunal examined the memorandum of association and concluded that the appellant's activity did not prima facie come under Business Auxiliary Services. Consequently, the Tribunal granted a waiver from pre-deposit of dues and stayed recovery during the appeal.

Issue 2: Taxable value of service and reimbursable expenses
The appellant contended that reimbursable expenses received should not be added to the taxable value as per Rule 5(1) of the Service (Determination of Value) Rules, citing a High Court judgment. They also referred to a Tribunal case and a circular supporting their stance. The department argued that the arrangement was to avoid tax liability and that the activities undertaken by the appellant for group companies constituted Business Auxiliary Services. However, the Tribunal found that the appellant's activity of supplying staff did not align with Business Auxiliary Services and granted a waiver on dues.

Issue 3: Eligibility for stay on recovery of dues
Both parties requested an early appeal hearing due to the significant revenue involved. The Tribunal acknowledged the revenue stake and directed the appeal to be listed for final hearing promptly, demonstrating a fair approach to resolving the matter efficiently.

In conclusion, the Tribunal ruled in favor of the appellant, granting a waiver on pre-deposit of dues and staying recovery during the appeal process. The judgment highlighted the importance of assessing the nature of services provided to determine tax liability accurately and efficiently.