2016 (1) TMI 208 - AT - Service Tax

Management Consultant Service - appellant submits that their activities are confined to supply the manpower and supervision thereof, hence the same is not covered under the definition of Management Consultant Service - It was contended that there services are not taxable during the relevant period i.e. 2002-03 and 2003-04 - Held that - In the present case, first manpower is recruited, thereafter supervision of the said manpower is carried out by the appellant. Therefore, the services of the appellant that is requirement of staff and continuous supervision, thereof, in our view falls under Management Consultant Service . Further from the bills issued by the appellant to their client the description of services is Supervision Charges of Manpower . This fact also shows that the appellant is providing services of supervision of manpower and supervision of manpower does not fall under supply of manpower. - the service provided by the appellant falls under the definition of Management Consultant Service , therefore it is indeed taxable. Demand of service tax confirmed with interest - penalty reduced - Decided partly in favor of assessee.

Summary

Issues:
- Classification of services as "Management Consultant Service"
- Time bar for demand of service tax
- Imposition of penalty under Section 78
- Imposition of penalty under Section 77

Classification of services as "Management Consultant Service":
The appellant provided services of consultancy and supervision of manpower without discharging service tax. The dispute arose regarding whether these services fell under "Management Consultant Service." The appellant argued that their services were limited to supplying and supervising manpower, not falling under the said category. They contended that their services were akin to supply of manpower, not taxable during the relevant period. However, the Memorandum of Understanding between the parties revealed that the appellant primarily engaged in recruitment and supervision of staff, which the tribunal deemed as falling under "Management Consultant Service." The tribunal held that the charges for supervision of manpower indicated the nature of the appellant's service, thus making it taxable under the aforementioned category.

Time bar for demand of service tax:
The appellant claimed that the demand was time-barred as the show cause notice was issued after a significant delay. They argued that their transactions were recorded in their accounts, and they believed in good faith that their services did not fall under the taxable category. The tribunal, however, noted that the appellant had not disclosed their activities to the department, leading to a suppression of facts. Consequently, the tribunal found the demand not time-barred due to the appellant's failure to declare taxable value in their returns.

Imposition of penalty under Section 78:
Regarding the imposition of penalty under Section 78, the tribunal observed that the lower authorities had imposed the maximum penalty of twice the tax amount. Despite the absence of malafide intent on the appellant's part, the tribunal reduced the penalty to an amount equal to the service tax, considering the overall circumstances of the case. The penalty under Section 77, amounting to &8377; 2000, was upheld.

In conclusion, the tribunal modified the impugned order, reducing the penalty under Section 78 while maintaining the penalty under Section 77. The demand for service tax and interest, along with the payment already made by the appellant, were upheld. The appeal was partly allowed based on the aforementioned terms.