2013 (11) TMI 1405 - AT - Service Tax

Differential service tax liability - Manpower Recruitment Agency services - Discharge of service tax liability on the entire amounts received - Held that - show-cause-notice issued to the appellant specifically talks about inclusion of the difference in income shown between the balancesheet and ST-3 returns filed by the appellant. The annexure to show-cause-notice specifically talks about the such difference - invoices which were produced by the appellant do not inspire any confidence to hold that amount which have been paid as salary and wages are reimbursed by the service recipient, since we are unable to come to any conclusion that documents produced by the appellant indicate that there was reimbursement of expenses from the service recipient - Following decisions of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India 2012 (12) TMI 150 - DELHI HIGH COURT and Malabar Management Services Pvt. Ltd. vs. Commr. Of S.T. & Modern Business Solutions 2007 (10) TMI 135 - CESTAT, CHENNAI - Partial stay granted.

Summary

Issues involved:
Waiver of pre-deposit of service tax liability, interpretation of Service Tax Valuation Rules, reimbursement of expenses by service recipient, applicability of legal precedents.

Analysis:
The appellant filed a stay petition seeking a waiver of pre-deposit of Rs. 70,21,924, confirmed as differential service tax liability for the period 2005-06 to 2009-10, along with interest and penalties. The dispute arose from the appellant allegedly not discharging service tax liability on the entire amounts received while providing Man Power Recruitment Agency services.

The appellant's counsel argued that the appellant had indeed paid service tax on the service charges levied on the service recipient. Referring to specific agreements and legal precedents, the counsel contended that expenses like wages, PF, ESI, and uniform allowances were reimbursed by the service recipient, and thus, not liable for service tax. The appellant relied on the striking down of Rule 5(1) of the Service Tax Valuation Rules, 2006, by the Hon'ble High Court of Delhi in support of their case.

The departmental representative countered by pointing out that the invoices provided by the appellant did not clearly indicate reimbursement of expenses like wages. The revenue's case was based on the appellant's balance sheet, showing total amounts received as income, and arguing that the appellant's engagement of individuals for man power recruitment services did not involve reimbursement of expenses.

Upon considering both sides' arguments and reviewing the records, the Tribunal found that the appellant's defense rested on the reimbursement of expenses, which was not conclusively supported by the documents presented. While acknowledging the legal precedents cited by the appellant, the Tribunal deemed the issue arguable and directed the appellant to deposit Rs. 7 lakhs within 8 weeks. The Tribunal stayed the recovery of the remaining balance pending the appeal's final disposal.

In conclusion, the Tribunal found the issue complex and requiring further examination during the final disposal of the appeal. The appellant was granted conditional relief, pending compliance with the deposit directive, and the remaining pre-deposit amount was stayed until the appeal's resolution.