2016 (11) TMI 110 - AT - Service Tax

Manpower Recruitment or Supply Agency services - it was contended that, SBL is a distributor of their goods and is employing these staff on behalf of the appellant to promote the sale of J&J range of products. - Held that - the agreement with SBL is not an agreement of service provision but it is an agreement involving only reimbursement - The decision of Hon ble High Court of Gujarat in Arvind Mills Ltd. 2014 2014 (4) TMI 132 - GUJARAT HIGH COURT applies - SBL is not engaged in the business of supplying manpower. Only actual cost incurred is recovered from the appellant and there is no element of profit to SBL - demand in respect of Manpower Recruitment or Supply Agency services is set aside Management, Maintenance or Repair services in respect of SAP software - Held that - In the decision of the Tribunal in Persistent System Ltd. 2016 2016 (3) TMI 402 - CESTAT MUMBAI In the said decision, it has been held that while canned software can be treated as goods the customer specific software would be classified as Information Technology software - service tax can only be demanded on the service received w.e.f. 16.05.2008 - Decided partly in favor assessee.

Issues Involved:
1. Business Auxiliary Service
2. Manpower Recruitment or Supply Agency Services
3. Management or Business Consultancy Services
4. Management, Maintenance, or Repair Services
5. Video Tape Production Services
6. Internet Telecommunication Services
7. Commercial Training & Coaching Service
8. Sponsorship Services

Issue-wise Detailed Analysis:

1. Business Auxiliary Service:
The appellants paid the entire service tax demanded for the period from 22.05.2006 to 18.12.2008 before the issuance of the show-cause notice. They argued that penalties should not be imposed as the tax was paid during the investigation period. The Tribunal upheld the demand of service tax and interest but set aside the penalties, invoking sub-section (3) of section 73, as no suppression was involved.

2. Manpower Recruitment or Supply Agency Services:
The demand for this service pertained to the agreement with Swiss Biogenic Ltd. (SBL) in Sri Lanka. The appellants argued that SBL was not a manpower recruitment agency but a distributor employing staff to promote their products, and the costs were reimbursed. The Tribunal agreed, relying on the decisions of the Hon'ble High Courts in Arvind Mills Ltd. and Intercontinental Consultants & Technocrafts, and set aside the demand and penalties.

3. Management or Business Consultancy Services:
The appellants paid the service tax and interest for the period from 31.07.2007 to 09.01.2009 before the issuance of the show-cause notice. The Tribunal upheld the demand of service tax and interest but set aside the penalties, invoking sub-section (3) of section 73, as no suppression was involved.

4. Management, Maintenance, or Repair Services:
The demand involved six invoices, with the appellants contesting the period prior to 16.05.2008, as maintenance or repair of software was introduced under Section 65 of the Finance Act effective from 16.05.2008. The Tribunal, relying on the decision in Persistent System Ltd., held that service tax could only be demanded from 16.05.2008 onwards and set aside the demand and penalties for the period before this date.

5. Video Tape Production Services:
The appellants paid the service tax and interest for the period from 05.03.2007 to 12.04.2007 before the issuance of the show-cause notice. The Tribunal upheld the demand of service tax and interest but set aside the penalties, invoking sub-section (3) of section 73, as no suppression was involved.

6. Internet Telecommunication Services:
The appellants paid the service tax and interest for the period from 05.01.2007 to 20.05.2008 before the issuance of the show-cause notice. The Tribunal upheld the demand of service tax and interest but set aside the penalties, invoking sub-section (3) of section 73, as no suppression was involved.

7. Commercial Training & Coaching Service:
The appellants paid the service tax and interest for the period from 08.04.2005 to 05.05.2008 before the issuance of the show-cause notice. The Tribunal upheld the demand of service tax and interest but set aside the penalties, invoking sub-section (3) of section 73, as no suppression was involved.

8. Sponsorship Services:
The appellants paid the service tax and interest for the period from 18.07.2007 before the issuance of the show-cause notice. The Tribunal upheld the demand of service tax and interest but set aside the penalties, invoking sub-section (3) of section 73, as no suppression was involved.

Additional Findings:
- The Tribunal found that the liability for service tax for sr.no. 2, 3, 5, 6, and 8 started after the initiation of the investigation.
- For sr.no. 1 and 7, the liability arose before the investigation started, and penalties were upheld due to suppression or misdeclaration.
- The Tribunal set aside the demand and penalties for Manpower Recruitment or Supply Agency services, as the agreement with SBL was not for service provision but reimbursement.
- For Management, Maintenance, or Repair services, the Tribunal set aside the demand and penalties for services received before 16.05.2008, as SAP software maintenance was considered IT service, not computer software.

Conclusion:
The appeal was disposed of with the duty demand, interest, and penalties adjusted as per the Tribunal's findings. The penalties were set aside for sr.no. 2, 3, 5, 6, and 8, while they were upheld for sr.no. 1 and 7. The demand for Manpower Recruitment or Supply Agency services was set aside, and the demand for Management, Maintenance, or Repair services was limited to the period after 16.05.2008.

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