2015 (1) TMI 952 - AT - Service Tax

Manpower supply services - Disbursal of employee s salary - Held that - In the absence of any agreement between the manpower supply service provider as held by the department and the service receivers; in the absence of any proof to show that there was an understanding to that effect; and in the absence of any remuneration paid to the appellants and in view of the fad that the Provident Fund (PF) was directly paid by the service receiver to the PF authorities, we consider that appellants have made out a prima facie case for waiver of pre-deposit. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeals - Stay granted.

Summary

Issues:
Identification of service tax liability for employees disbursement of salaries without a formal agreement or contract with the company.

Analysis:
The judgment addressed the issue of whether two employees, who were disbursement agents for their respective companies, should be considered as suppliers of manpower services and be liable for service tax. The Revenue contended that since the companies transferred amounts to the employees' bank accounts for salary disbursement to contract laborers, the employees were providing manpower supply services. However, the appellants argued that they were merely discharging their duties as employees without any formal agreement or contract with the companies. The counsel highlighted that the employees were directed by the employers to disburse salaries, and there was no evidence of any extra remuneration received by the appellants. The absence of a formal agreement, lack of proof regarding remuneration, and the direct payment of Provident Fund by the service receiver were crucial points in the appellants' defense.

The Tribunal considered the submissions made by both parties and found merit in the appellants' arguments. Despite the Revenue's assertion that the transfer of funds to the employees' bank accounts indicated their role as manpower service providers, the Tribunal was not convinced. The absence of a formal agreement between the service providers and the service receivers, lack of evidence supporting the Revenue's claim, and the direct payment of Provident Fund by the companies were pivotal factors in the Tribunal's decision. Consequently, the Tribunal held that the appellants had established a prima facie case for the waiver of pre-deposit. As a result, the requirement for pre-deposit was waived, and a stay against recovery was granted for the duration of the appeals. The judgment emphasized the importance of factual evidence and agreements in determining service tax liability, ultimately ruling in favor of the appellants based on the presented facts and legal arguments.