2014 (4) TMI 792 - AT - Service Tax

Demand of service tax - construction of complex services - Held that - Although the activity does not amount to manufacture but once duty on final product has been accepted by the Department then the credit taken by the assessee cannot be denied. Therefore, as per the said decision, applicant has made out a case for waiver of predeposit on account of payment made by them utilizing their CENVAT credit account. Manpower recruitment and supply agency service - Held that - Towards the demand under the category of manpower recruitment and supply agency service , we find that applicant has only reimbursed salary portion which has been paid by their foreign counterpart is also covered by the decision of this Tribunal in the case of ITC Ltd. Vs. CST, New Delhi 2012 (7) TMI 744 - CESTAT, NEW DELHI wherein it has been held that the payment of salary by their foreign counterpart in foreign currency abroad is not covered by manpower recruitment and supply agency service as the applicant having the control over the employees and the services of employee have availed by the applicant themselves and they have also reimbursed the salary paid by the foreign counterpart. Therefore, in this count also, the applicant has made out a prima facie case in their favour - Stay granted.

Summary

Issues:
1. Demand of service tax on construction of complex services.
2. Demand of service tax on manpower recruitment and supply agency services.

Analysis:
1. The judgment addresses the demand of Rs.8,87,24,524/- related to 'construction of complex services'. The applicant, engaged in construction activities, was paying service tax using CENVAT credit account and in cash. The demand was confirmed based on the premise that they couldn't pay service tax using their CENVAT credit account. However, referencing the case of Ajinkya Enterprises Vs. CCE, Pune-III, the Tribunal held that if duty on the final product is accepted by the Department, the credit taken by the assessee cannot be denied. Consequently, the applicant was deemed to have a case for waiver of predeposit due to payment made through their CENVAT credit account.

2. Regarding the demand under 'manpower recruitment and supply agency services', it was noted that the applicant had only reimbursed the salary portion paid by their foreign counterpart. Citing the case of ITC Ltd. Vs. CST, New Delhi, the Tribunal established that payment of salary by the foreign counterpart in foreign currency abroad is not covered under manpower recruitment and supply agency services. Since the applicant had control over the employees, availed their services directly, and reimbursed the salary, they were considered to have a prima facie case in their favor. As a result, the requirement of predeposit was waived, and a stay against recovery was granted during the appeal process.

This judgment showcases a detailed analysis of the issues pertaining to service tax demands on construction services and manpower recruitment activities. By referencing relevant precedents and legal principles, the Tribunal provided a comprehensive rationale for granting relief to the applicant in both instances, emphasizing the importance of CENVAT credit utilization and the nature of salary reimbursements in determining tax liabilities.