2014 (3) TMI 901 - AT - Service Tax

Waiver of pre deposit - Manpower Recruitment and Supply Agency Service - Held that - Commissioner had given a detailed finding that there is no employer employee relationship between the applicant-company and the Japanese company. We have perused the clauses as reproduced in the adjudication order. In the present case, we find that M/s. NSK Ltd. Japan has supplied their employees and rendered service in the joint venture company who is the applicant and both are separate company under the Act. So, the submission of the learned counsel that there is no relation of service provider and client in the joint venture company would be examined after going through the agreement in detail at the time of appeal hearing. The decision of the Hon ble Supreme Court in the case of Eli Lilly & Co. (2009 (3) TMI 33 - SUPREME COURT ) is in the context of deduction of tax at source under the Income Tax Act. Prima facie, we find that there is a categorical observation of the Commissioner that the applicant paid the amount to M/s. NSK Ltd. Japan for the service rendered by its employees. Hence the applicant failed to make out a prima facie case for waiver of entire amount of tax and penalty along with interest - Conditional stay granted.

Summary

Issues:
Demand of service tax under various categories for a specific period.

Analysis:
The judgment involves a case where the applicant, engaged in the manufacture of bearings, faced a demand of service tax under different categories for a particular period. The adjudicating authority confirmed the tax demand, along with interest and penalty, totaling a significant amount. The applicant argued that there was no employer-employee relationship between the applicant-company and the Japanese company, M/s. NSK Ltd. Japan, as the latter supplied employees to the joint venture company formed with an Indian company. The applicant contended that no service tax was payable, citing the decision of the Hon'ble Supreme Court in a relevant case. The applicant had already deposited a portion of the demanded amount.

The Revenue, represented by the learned AR, supported the findings of the Commissioner and highlighted clauses from the Master Secondment Agreement (MSA) to refute the applicant's claims. The Revenue pointed out that the Supreme Court's decision cited by the applicant was not directly applicable to the employer-employee relationship in this case. After considering both arguments and examining the records, the Tribunal found that the Commissioner had already determined the absence of an employer-employee relationship between the applicant and the Japanese company. The Tribunal noted that M/s. NSK Ltd. Japan had provided employees and services to the joint venture company, which were distinct legal entities. The Tribunal decided to further scrutinize the service provider-client relationship during the appeal hearing, emphasizing that the payment made by the applicant to the Japanese company was for services rendered by its employees.

Ultimately, the Tribunal concluded that the applicant had not established a prima facie case for waiving the entire tax amount and penalty. However, considering the submissions from both sides and the records, the Tribunal directed the applicant to deposit an additional sum within a specified period. Upon compliance with this directive, the predeposit of the remaining tax amount, interest, and penalty would be waived, and the recovery thereof stayed during the appeal process. The judgment was dictated and pronounced in an open court session.