2014 (1) TMI 1555 - AT - Service Tax

Valuation of service - Service of manpower supply - Assessee paid tax on the portion of the service charges retained by the appellants - Assessee excluded labour wages and other amount received from the textile mills and SSC Board - Held that - Section 67 of the Finance Act provides that the assessee is liable to pay service tax on the gross amount received in respect of the service provided. In the present case, the service is of supply of manpower - The appellants are receiving the gross amount in respect of the labour supplied to the service recipient hence in view of the provisions of Section 67 of the Finance Act, the appellants are liable to pay service tax on the gross amount received - Decided against assessee.

Summary

Issues: Valuation of service provided to textile mills and SSC Board; Time bar for demand of service tax; Quantification of demand

Valuation of service provided to textile mills and SSC Board:
The appeal centered on the valuation of services provided by the appellants to textile mills and SSC Board for supplying manpower. The appellants contended that they should only pay service tax on the service part, excluding wages and other amounts. They relied on a Delhi High Court decision to support their argument. However, the Revenue argued that as per Section 67 of the Finance Act, service tax should be paid on the gross amount received for the service provided. The Tribunal found that the appellants were aware of their liability to pay service tax on the gross amount and dismissed the appeal based on the Finance Act provisions.

Time bar for demand of service tax:
The appellants claimed that the demand for service tax was time-barred as the show cause notice was issued after the Revenue was already aware of the tax payment practices of the appellants. They argued that the demand was not sustainable due to the Revenue's prior knowledge and audit objections. However, the Revenue contended that there was clear suppression by the appellants to evade tax. The Tribunal noted that the appellants had paid tax on the gross amount for other clients, indicating awareness of tax liability, and dismissed the time bar argument.

Quantification of demand:
Regarding the quantification of the demand, the appellants disputed the inclusion of TDS and other deductions made by textile mills in the calculation of service tax liability on the gross amount. The Revenue argued that TDS should be considered part of the gross amount received by the appellants. The Tribunal found that TDS, being refundable or adjustable during income tax payment, was indeed part of the gross amount. Consequently, the Tribunal dismissed the appeal, upholding the Revenue's quantification method.

In conclusion, the Tribunal upheld the Revenue's position on all issues, emphasizing the applicability of Section 67 of the Finance Act for service tax calculation on the gross amount received, rejecting the time bar defense, and affirming the inclusion of TDS in the gross amount for service tax quantification.