2016 (9) TMI 738 - AT - Service Tax

Manpower recruitment and supply agency services - supply of labour to the appellant s customers - Held that - Since the contract and the bills clearly indicate that the appellant is supplying labour and is getting paid for the supply of the labour in terms of the minimum wages, that portion of the demand needs to be upheld. The calculations of the correct tax liability needs to be reworked/requantified by the adjudicating authority on this issue by extending the benefit of cum tax liability. The service tax liability on this portion on the appellant is upheld with interest liability. Since the appellant has not discharged the tax liability for the entire period, the provisions of Section 78 also gets attracted and the penalty amount will be equal to the tax liability on requantification of the demand by the lower authorities. Demand of service tax on lump-sum works contract and demand beyond the period of 5 years set aside. Decided partly in favor of assessee.

Summary

Issues:
1. Confirmation of demand of tax liability under the category of 'manpower recruitment and supply agency services'.
2. Validity of demands beyond five years from the date of show cause notice.
3. Tax liability on labor work categorized as 'manpower supply agency'.

Analysis:

Issue 1: The appellant contested the demand of tax liability under the category of 'manpower recruitment and supply agency services'. The Tribunal noted that the appellant operated under lump sum contracts for specific work, which had been previously addressed in various Tribunal decisions. Referring to a specific case, the Tribunal set aside the demands related to service tax on amounts received for lump sum contracts from the appellant's customers.

Issue 2: The Tribunal examined the validity of demands beyond five years from the date of the show cause notice. It observed that the show cause notice issued on 25.3.2011 could not demand service tax liability for the period prior to 25.3.2006. Citing Section 73 of the Finance Act, 1994, the Tribunal held that recovery of tax not paid/short paid for a period up to five years could be pursued through the extended period. Consequently, any demand of service tax liability confirmed for periods beyond the permissible limit was set aside.

Issue 3: The tax liability on labor work categorized as 'manpower supply agency' was scrutinized by the Tribunal. After reviewing the contracts and bills, it was established that the appellant supplied labor to customers and received payment based on minimum wages. The Tribunal upheld the demand related to the supply of labor, directing the adjudicating authority to rework the tax liability calculations by considering cum tax liability. The appellant was held liable for service tax on this portion with interest. Additionally, the penalty under Section 78 was imposed as the appellant had not fulfilled the tax liability for the entire period.

In conclusion, the Tribunal disposed of the appeal by setting aside certain demands, upholding others, and directing a reassessment of tax liability on the labor work under the 'manpower supply agency' category.