2016 (10) TMI 189 - AT - Service Tax

Service tax liability - Manpower Recruitment or Supply Agency Services - appellant used to receive as commission an amount equivalent to 3% of the total salary paid by Paranjape Auto Cast - whether the tax liability arises on the appellant-assessee on the entire amount paid as wages by Paranjape Auto Cast or otherwise - Held that - the service tax liability discharged by the appellant on the amount equivalent to 3% paid by Paranjape Auto Cast is the correct discharge of service tax liability as there is nothing on record to indicate that M/s. Paranjape Auto Cast had paid the amount of wages/salaries of the recruits to appellant and appellant had paid the same to the individuals. In the absence of any such evidence, we hold that service tax liability as discharged by the appellant is correct and the impugned order holding that the appellant is required to include the amount of wages for discharging service tax liability is incorrect and liable to be set aside and we do so. Since we have disposed of the appeal on merits, in the favour of the appellant we do not find any reason to record any findings on the appeal filed by the revenue. - Decided in favour of appellant with consequential relief

Summary

Issues:
Tax liability on the entire amount paid as wages by the client for "Manpower Recruitment or Supply Agency Services."

Analysis:
The case involved two appeals against an Order-in-Original. The Revenue contested the dropping of proceedings for the extended period, while the Assessee challenged the confirmation of demands, interest, and penalties. The main issue was whether the Assessee was liable to pay service tax on the total amount received for providing "Manpower Recruitment or Supply Agency Services."

The Assessee was engaged in providing services to a client and had not discharged correct service tax on the total amount paid by the client. A show cause notice was issued for the demand of service tax for a specific period. The adjudicating authority dropped the proceeding for the extended period but confirmed the demands within the limitation period, imposing interest and penalties.

The Assessee argued that they were only responsible for supervising the work of recruits and should be classified under "Business Support Services" rather than "Manpower Recruitment Services." The Departmental Representative contended that the Assessee had complete supervision over the recruits' work, making it fall under "Manpower Recruitment or Supply Agency Services."

Upon reviewing the agreement between the Assessee and the client, the Tribunal found that the Assessee was paid a commission for providing a list of recruits and supervising their activities. The Tribunal concluded that the service tax liability discharged by the Assessee on the commission received was correct. There was no evidence to suggest that the Assessee handled the wages of the recruits, leading to the decision that the Assessee was not required to include the wages for discharging service tax liability.

The Tribunal allowed the Assessee's appeal, providing consequential relief, and rejected the Revenue's appeal. The cross-objection was also disposed of accordingly. The judgment favored the Assessee, and no findings were recorded on the Revenue's appeal.

In conclusion, the Tribunal ruled in favor of the Assessee, determining that the service tax liability was correctly discharged based on the commission received, and the demand for including the wages for tax liability was incorrect.