2014 (4) TMI 639 - AT - Service Tax

Demand of service tax - manpower recruitment agency services - Penalty u/s 76, 77, 78 - Held that - appellants had produced a list of customers to whom they had provided service and who were exporting of their services and some of their customers had confirmed the same also. Moreover as mentioned in the statement of facts, the Board s circular clarifies that no service tax would be liable on secondary services if the secondary services are used by the exporter. The claims made by the appellant has not been considered and even in cases where letters have been received, no verification has been conducted. Nevertheless, the fact remains that the most important element required viz. the service receivers had exported service and received the consideration in convertible foreign currency has not been produced and this was admitted. Nevertheless while the demand for service tax with interest has to be sustained but in my opinion under these circumstances as discussed above, the benefit of provisions of Section 80 for waiver of penalty under Section 76, 78 of the Act is required to be extended. CENVAT Credit - Interpretation of Rule 6 of CCR - Held that - rule is very clear and service tax is payable on a monthly basis and therefore the percentage mentioned in the rule has to be calculated on a monthly basis only. I find that no other interpretation is possible as far as this rule is concerned. Therefore the irregular utilization of the credit by the appellant has to be upheld. CENVAT Credit - Mobile phones - Held that - amount involved is small and there is no finding or no verification as to whether company had paid the tax or not. The learned counsel submitted that mobile phones were in the name of company only and tax was also paid by the company only. Having regard to the facts and circumstances and the proceedings and investigation, I find that the credit cannot be denied. Penalties under Section 76, 77 & 78 is waived invoking Section 80 - Decided partly in favour of assessee.

Summary

Issues involved:
1. Service tax liability on manpower recruitment agency services provided.
2. Service tax liability on franchise services.
3. Demand of service tax wrongly utilized under CENVAT Credit Rules.
4. Irregularity in CENVAT credit utilization for payment of service tax.
5. CENVAT credit upheld as irregular in respect of mobile phones.
6. Penalties under Sections 76, 77, and 78 of the Finance Act.
7. Penalty imposed under Rule 15(3) and Rule 15(4) of CCR.

Issue (i): The appellant's service tax liability on manpower recruitment agency services was contested on the basis of exemption due to services provided to service providers who exported the service entirely. Despite efforts, the appellant failed to produce evidence of income receipt in convertible foreign exchange. The Revenue treated the appellant as ineligible for exemption, demanding tax on the entire service charges received. The appellant's claims were not fully considered, but due to circumstances, waiver of penalties under Section 76 and 78 of the Act was deemed necessary.

Issue (ii): The liability on franchise services was acknowledged by the appellant, attributing the failure to pay tax to a mistake with no intention. Considering the appellant's cooperation, the demand for service tax was upheld while penalties under Sections 76 and 78 were waived.

Issue (iii): An amount was demanded for wrongly utilized CENVAT credit. The appellant's irregular utilization was noted, leading to a demand. Despite certain factors favoring the appellant, the demand was upheld, but penalties under Section 76 and 78 could be waived under Section 80 of the Finance Act.

Issue (iv): The CENVAT credit upheld as irregular in respect of mobile phones was deemed small, with no verification if tax was paid. The credit could not be denied, and the appeal in this regard was allowed.

Issues (v) & (vii): Penalties under Sections 76 & 78 were waived as discussed in previous issues.

Issue (vi): Penalty under Section 77 was upheld.

Issue (viii): Penalty imposed under Rule 15(3) of CCR was upheld due to wrongful CENVAT credit utilization.

Issue (ix): The penalty imposed under Rule 15(4) of CCR was set aside as the issue of limitation was not contested, and the demand was confirmed without contesting on limitation grounds.

The judgment allowed the appellant to seek appropriation of amounts under various heads for payment convenience to the Revenue.