2017 (6) TMI 1232 - AT - Service Tax

Classification of services - deputation of certain qualified technical staff to Joint Venture companies for performing the assigned duties - whether the services are to be classified under the head Manpower Recruitment or Supply Agency s Service or otherwise? - Held that - Similar set of facts have come up for consideration before this Tribunal in the case of ONGC vs CST New Delhi 2016 (8) TMI 500 - CESTAT NEW DELHI wherein the Tribunal while dealing with a similar situation had held that no tax liability arise for such activity under category recruitment or supply of manpower - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability under the category of 'Manpower Recruitment or Supply Agency's Service'.

Analysis:
The appeal was filed against the order-in-original passed by the Commissioner of Central Excise & Service Tax, New Delhi, holding the assessee liable for Service Tax under the category of 'Manpower Recruitment or Supply Agency's Service'. The assessee, a Government of India undertaking engaged in gas processing, distribution, and marketing of natural gas, had set up joint venture companies with Indian Oil Company Ltd. and Bharat Petroleum Corporation Limited. As part of their obligation, the assessee deputed qualified technical staff to these joint venture companies. The Revenue contended that such activity falls under the taxable category mentioned above, leading to the imposition of Service Tax liability amounting to ?91,38,790/- along with an equal penalty for the period from October 2006 to March 2011.

Upon hearing both sides and examining the joint venture agreement, the Tribunal noted that the assessee was obligated to depute technical staff to the joint venture companies and received payment for their salaries on an actual basis. The Tribunal referred to previous decisions, including ONGC vs CST, New Delhi, where it was held that no tax liability arises for such activities under the category of 'recruitment or supply of manpower'. Additionally, references were made to the decisions of the Gujarat High Court and the Allahabad High Court, supporting the Tribunal's stance.

Based on the precedents and the specific circumstances of the case, the Tribunal concluded that the assessee cannot be subjected to tax liability under the category of 'Manpower Recruitment or Supply Agency's Service'. Consequently, the impugned order was set aside, and the appeal by the assessee was allowed. The Tribunal's decision was pronounced in the open court, where the appeal filed by the assessee was allowed.