2013 (10) TMI 391 - AT - Service Tax

Waiver of pre deposit - man power supply services - Section 65 (105)(k) - assessee contended that they were not supplying man power for doing work under the supervision of clients. But, they had specific responsibilities in relation to development of software and the activities could be classified only as Information Technology Services made taxable under section 65 (105)(zzzze) - Held that - wherever similar contracts by one party with other software companies, where the details of software developed were not specified in the contract, we had taken a prima facie view that the contracts were for man power supply. The contract do not show any specific software developed or any such activity but only has placed general contracts which does not seem to reveal the actual state of affairs. This issue will be looked into in more detail at the time of final hearing of appeal. At this stage, prima facie we are not convinced by the argument of the applicant that the service rendered by them was in the nature of information technology service and not manpower supply service. - stay granted partly.

Summary

Issues:
1. Classification of services provided by the applicant to various parties.
2. Taxability of expenses reimbursed for travel expenses.
3. Service tax demand on the difference in value between actual receipts and taxable value reported.

Issue 1: Classification of services provided
The Revenue contended that the services provided by the applicant to certain parties were in the nature of 'man power supply' taxable under section 65 (105) (k) of Finance Act, 1994. The applicant argued that they were providing Information Technology Services taxable under section 65 (105)(zzzze) since 2008. The applicant highlighted specific responsibilities in relation to software development in the contracts, emphasizing activities like design, coding, and testing. The contracts also contained clauses regarding remedies for failure to perform, indicating a broader scope of work beyond mere manpower supply.

Issue 2: Taxability of reimbursed travel expenses
The applicant contested a demand of Rs.29 lakhs related to expenses reimbursed for travel of their employees, citing the striking down of Rule 5 of the Service Tax Valuation Rules by the Delhi High Court. The argument was based on the legal precedent set by the court's decision in the case of Intercontinental Consultants and Technocrafts Pvt. Ltd. vs. Union of India, which challenged the validity of Rule 5.

Issue 3: Service tax demand on the difference in value
Another amount of Rs.8.39 lakhs was in dispute concerning service tax demand on the variance between actual receipts and taxable value reported for share transfer service and coaching services. The applicant attributed this difference to reimbursable expenses incurred for these services. The contention was that the discrepancy in value was due to the inclusion of reimbursable expenses in the reported taxable value, warranting a reassessment of the service tax liability.

In the judgment, the Tribunal acknowledged the arguments presented by both parties. While the applicant asserted that their services were more aligned with Information Technology Services rather than mere man power supply, the Tribunal noted a lack of specificity in the contracts regarding the software developed. The Tribunal directed the applicant to make a pre-deposit of Rs.80,00,000 for admission of the appeal, indicating a partial waiver of the balance dues subject to compliance. The decision highlighted the need for a more detailed examination of the nature of services provided by the applicant, especially in cases where the specifics of software development were not explicitly outlined in the contracts.