2016 (12) TMI 666 - AT - Service Tax

Demand of differential service tax - Manpower Recruitment or Supply Service - whether service tax is leviable on service charges collected by the appellant for recruiting and providing manpower to the state government departments or whether the assessable value includes the salaries paid to the staff by the appellant and reimbursed by the government? - Held that - appellant has not made of a prima facie case for full waiver of pre-deposit. We therefore direct to pre-deposit ₹ 6 lakhs. - stay granted partly.

Summary

Issues involved:
Appeal against demand of differential service tax under 'Manpower Recruitment or Supply Service' category - Whether service tax leviable on service charges for recruiting and providing manpower to state government departments - Applicability of service tax on reimbursable expenses like salaries - Pre-deposit requirement for waiver of full amount.

Analysis:
The appellant filed an appeal challenging the demand of differential service tax under the 'Manpower Recruitment or Supply Service' category. The main legal issue at hand was whether service tax should be imposed on the service charges collected by the appellant for recruiting and supplying manpower to state government departments, and whether the salaries paid to the staff by the appellant and reimbursed by the government should be included in the assessable value. The appellant contended that service tax should only be paid on the service charges received, and that reimbursable expenses such as salaries should not be subject to service tax. The appellant highlighted that the demand notices were periodic, and a previous notice had been set aside by the Tribunal, leading to a remand to the original authority for recalculating the service tax after deducting the value of certain items like ration cards and Election Photo Identity Cards (EPIC). In the current appeal, two periodic notices were issued, including the value of these cards treated as goods. The adjudicating authority, in a fresh order, deducted the value of EPIC and ration cards but confirmed the demand based on the remaining amount reflected in the Profit & Loss account of the appellant.

Regarding the pre-deposit requirement, after hearing both sides, the Tribunal found that the appellant had not established a prima facie case for a full waiver of pre-deposit. Consequently, the Tribunal directed the appellant to pre-deposit an amount of ?6 lakhs within four weeks from the date of the order. Failure to comply with this directive within the stipulated period would lead to the dismissal of the case under Section 35F of the Central Excise Act, 1944 without further notice. The case was scheduled for compliance reporting on 26.09.2016, with the operative part of the order being pronounced in court at the conclusion of the hearing.