2015 (12) TMI 1272 - AT - Service Tax

Waiver of pre deposit - Demand of service tax - Manpower supply service - Held that - Prima facie, contention of the appellant does not appeal to common sense when the manpower supply contractor has a liability to compensate the labourers engaged. The contract is only concerned with the agreed amount to be paid to the contractor. Bifurcation of the receipt does not ipso facto take away the appellants from the scope of taxation. However, all these are our prima facie view without expressing any opinion at this stage. - Keeping in view interest of Revenue, appellants are directed to predeposit 10% of the service tax demand in each case within eight weeks - Partial stay granted.

Summary

Issues:
Interpretation of taxability of salary, wages, and statutory payments in a manpower supply contract.

Analysis:
The appellant argued that the service charge part of the manpower supply contract had already been taxed, and they had no issue with that. However, they contended that the salary, wages, and statutory payments were not taxable. On the contrary, the Revenue claimed that all amounts received by the appellant constituted the gross value of the service provided and were therefore taxable. The Revenue argued that the term "reimbursement" held no legal significance, and the entire amount received should be subject to taxation as it was the gross value of the contract.

In evaluating the arguments, the Tribunal noted that the primary issue in all three appeals was the taxability of the salary, wages, and statutory payments in the manpower supply contract. The Tribunal observed that the appellant's attempt to bifurcate the receipts did not absolve them from taxation. The Tribunal expressed a prima facie view that the contractor's liability to compensate laborers was a crucial aspect of the contract, and the agreed amount to be paid to the contractor was the focal point. The Tribunal refrained from expressing a definitive opinion at that stage but emphasized that the appellant's contentions did not align with common sense.

Considering the interests of the Revenue, the Tribunal directed the appellants to predeposit 10% of the service tax demand in each case within eight weeks. Upon compliance with this directive, the predeposit of the remaining dues would be waived, and the recovery thereof stayed during the pendency of the appeals. Additionally, the Tribunal acknowledged the issues of time bar and the supply of laborers to Special Economic Zones (SEZs), indicating that these matters would be explored further through detailed arguments by both parties during the regular hearing.

In conclusion, the Tribunal highlighted the importance of the contractor's obligation to compensate laborers in a manpower supply contract and stressed that the gross value of the service provided was subject to taxation, irrespective of any attempts to segregate the receipts. The decision to predeposit a portion of the service tax demand was made in consideration of the Revenue's interests, with further discussions on time bar and labor supply to SEZs scheduled for detailed examination in subsequent hearings.