2017 (1) TMI 380 - AT - Service Tax

Manpower service - demand during the period 17/05/2004 to 02/03/2007 - The main submission of the appellant is that prior to 16/06/2005, as per the definition of manpower service under Section 16/06/2005, as per the definition of manpower service under Section 65 (68) of the Finance Act, 1994, only manpower recruitment was taxable and not manpower supply - Held that - Having perused the definition of the Section 65 (68) before and after the date of 16/06/2005 we hold that Since, the activity undertaken by them is in the nature of supply of manpower, the same cannot be charged to service tax upto 16/06/2005. For the year 2005-2006, the appellant is liable for payment of service tax for the consideration received for supplying manpower after 16/06/2005. Benefit of N/N. 6/2005-ST dated 01/03/2005 which exempts taxable services of aggregate value not exceeding ₹ 4 lakhs in a financial year from service tax - Held that - Having gone through the notification, we find the appellant is eligible for the benefit of the notification and would be liable for payment only for any amount of taxable service rendered over and above the same. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Service tax liability for the period 2004-2007 on supply of manpower to Bikaner University.

Analysis:
The appeal before the Appellate Tribunal CESTAT New Delhi was against the order-in-appeal passed by the Commissioner (Appeals), Jaipur regarding the service tax liability of the appellant, a labor contractor supplying manpower to Bikaner University. The dispute revolved around the non-payment of service tax on the consideration received for the services provided during the period 2004-2007. The Original Authority confirmed the demand for service tax, which was challenged before the Commissioner (Appeals) and subsequently brought before the Tribunal.

The appellant contended that prior to 16/06/2005, only manpower recruitment and not supply was taxable under the definition of manpower service. They argued that the amendment in the definition w.e.f. 16/06/2005 brought supply of manpower within the purview of taxable services. The appellant claimed that the demand for 2004-2005 was not sustainable, while for 2005-2006, they were eligible for the small scale exemption of ?4 lakhs. The tax liability for 2006-2007 was admitted by the appellant and not challenged.

The Tribunal considered the amendments in the definition of manpower service and the clarification provided by CBEC regarding the inclusion of manpower supply agencies post the amendment. It was observed that before 16/06/2005, the supply of manpower by the appellant could not be charged to service tax. However, for 2005-2006, the appellant was liable for service tax on the consideration received post 16/06/2005, with the benefit of exemption for the initial value of taxable services up to ?4 lakhs.

The appellant's admitted liability for 2006-2007 was confirmed by the Tribunal, along with the requirement to pay interest for delayed payment of service tax. The penalties imposed by the authorities below were set aside under Section 80 of the Finance Act, 1994. The original Adjudicating Authority was directed to verify the calculations of taxable service claimed and paid by the appellant, with any differential service tax arising from the verification to be paid by the appellant.

In conclusion, the appeal was partly allowed by the Tribunal, confirming the service tax liability for 2006-2007 while providing relief from penalties and directing further verification of taxable service calculations.