2015 (10) TMI 2459 - AT - Service Tax

Deputation of employees to group company - Manpower Supply Recruitment Agency Service - Appellant contends that employees were and are kept informed that their services may be utilised for any of organisation in group companies and salary paid by them to deputed employees is only amount collected by them from group companies which is reimbursement of actual expenses - Held That - Since, various group companies make salary payment to appellant on actual basis to deputed employees thus contention of the Revenue is incorrect as decided in case of Arvind Mills Ltd. 2014 (4) TMI 132 - GUJARAT HIGH COURT The definition though provides that Manpower Recruitment Supply Agency means any commercial concern engaged in providing any services directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client, in the present case, the respondent cannot be said to be a commercial concern engaged in providing such specified services to a client. It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied - Decided in favour of assessee.

Summary

Issues:
1. Service tax liability under the category of 'Manpower Recruitment and Supply Agency Services'.
2. Service tax liability under the category of 'Business Auxiliary Service'.
3. Imposition of penalties.

Analysis:
Issue 1: The appellant, registered under various taxable categories, was deputing employees to group companies and receiving reimbursement of their salaries. Revenue authorities alleged the reimbursement fell under 'Manpower Recruitment and Supply Agency Services', leading to a show cause notice. The appellant contested, citing a High Court judgment. The Tribunal found the deputation did not amount to 'Manpower Recruitment and Supply Agency Services' based on facts and the High Court precedent, setting aside the demand.

Issue 2: An amount under 'Business Auxiliary Service' was unpaid due to an inadvertent error, which the appellant later paid along with interest. The Tribunal upheld this liability but rejected the penalty imposed on this amount, considering it an inadvertent error.

Issue 3: The penalties imposed were set aside due to the rejection of the major demand under 'Manpower Recruitment and Supply Agency Services'. The Tribunal disposed of the appeal accordingly, emphasizing the setting aside of penalties and rejecting the demand under 'Manpower Recruitment and Supply Agency Services' while upholding the liability under 'Business Auxiliary Service'.