2015 (8) TMI 545 - AT - Service Tax

Denial of refund claim - Business Support Service or manpower recruitment service - Service tax paid mistakenly on an amount which was collected by them from their sister concern for deputing manpower - Held that - appellant has deputed their own employees to their sister concern and based on accounting entries of recovery of cost of such employees, under mis-understanding of law paid the service tax liability under Business Support Service. The adjudicating authority as well as the first appellate authority have held that the service tax liability does not arise under Business Support Service and Revenue has not filed any appeal against such order. As regards the findings of the adjudicating authority that the service tax payable would be under the category of Management Consultancy Service, the same has been rejected by the first appellate authority. Be that as it may, we find that this Tribunal in the case of Sugar Daurala Sugar Works (2014 (6) TMI 274 - CESTAT NEW DELHI) Daurala Organics (2009 (3) TMI 99 - CESTAT NEW DELHI) have categorically held that deputation of employees to their own sister concern would not fall under the category of Management Consultancy Service. Classification was not sought to be made by the show-cause notice nor by the adjudicating authority, secondly, assessee could not have addressed himself the classification of the services, unless the first appellate authority has issued a show-cause notice to the appellant to that effect. From the records it transpires that the first appellate authority has not issued show-cause notice to the appellant for reclassification of the service to the Manpower Recruitment or Supply Agency Service. On this legal issue itself, the impugned order is liable to be set aside. - deputation of employees to their own sister concern and recovering cost from them, would not amount to rendering of Manpower Recruitment or Supply Agency Service. The said view has been upheld by the Hon ble High Court as reported in 2014 (4) TMI 132 - GUJARAT HIGH COURT . - service tax paid by the appellant is not liable to be taxed under any category of the services as has been sought to be done so by the lower authorities - Decided in favour of assessee.

Summary

Issues:
Refund of service tax under Business Support Service, misinterpretation of law, rejection of refund claim, classification of service under Management Consultancy Service or Manpower Recruitment and Supply Agency Service.

Analysis:
The appeal was filed against the Order-in-Appeal rejecting a refund claim of service tax amounting to Rs. 19,21,770 under Business Support Service due to a misinterpretation of law. The appellant deputed manpower from their Mumbai office to their sister concern and paid service tax under the wrong category. The adjudicating authority initially accepted the service tax liability under Management Consultancy Service but later rejected the refund claim, stating the service falls under Manpower Recruitment and Supply Agency Service. The first appellate authority upheld the rejection based on the latter classification.

The appellant argued against this classification, citing contradictions in the orders and judicial precedents. They contended that the service provided did not fit under Manpower Recruitment and Supply Agency Service, as established by a Gujarat High Court ruling. Additionally, they referenced previous Tribunal decisions that clarified deputation of employees to a sister concern does not fall under Management Consultancy Service.

Upon review, the Tribunal found the core issue to be the correctness of the service tax payment for deputation of employees to the sister concern. It was established that the service tax liability did not arise under Business Support Service, and the Revenue did not challenge this decision. The Tribunal agreed with previous rulings that deputation of employees to a sister concern does not align with Management Consultancy Service. The first appellate authority's classification under Manpower Recruitment and Supply Agency Service was deemed incorrect as it was not raised in the show-cause notice, rendering the impugned order flawed.

Considering the legal precedents and lack of contrary judgments, the Tribunal concluded that the service tax paid by the appellant was not applicable under any category determined by the lower authorities. Therefore, the refund claim was deemed valid, and the impugned order was set aside, allowing the appeal with consequential relief.