2017 (5) TMI 1026 - AT - Service Tax

Manpower Recruitment Agency service - Labour contractor - supply of manpower - taxability - time limitation - Held that - the ultimate use of labour by the client is not a criteria to decide the tax liability under service tax provision - the demand u/s 73 (1) of the FA, 1994 has to be issued within the period with reference to relevant date as stipulated in the said Section. There is no provision to determine relevant date based on the date of knowledge acquired by the Department - appeal dismissed - decided against appellant.

Summary

Issues:
Service tax liability on supply of manpower by a labour contractor to a manufacturing unit. Time bar for issuing demand notice.

Analysis:
The appeal concerned the service tax liability of a labour contractor supplying manpower to a manufacturing unit. The Department initiated proceedings resulting in an order confirming the service tax liability along with penalties. The appellant contested the order on the grounds that the manpower supplied was used in manufacturing activities, thus no service tax liability should arise. Additionally, they argued that the demand notice was time-barred as it was issued three years after the audit. The ld. A.R. supported the findings in the impugned order, stating that the purpose for which the labourers were used is irrelevant in determining the tax liability of the appellant.

The Tribunal noted that the appellant was a labour contractor supplying manpower to the client for manufacturing activities, falling under the taxable category of Manpower Recruitment Agency. The relevant provisions defined taxable service in connection with recruitment or supply of manpower. The ld. Commissioner (Appeals) upheld the service tax liability, emphasizing that the nature of service provided by the appellant fell under 'Manpower Recruitment and Supply Agency Services'. The appellant's argument regarding the time bar was rejected, and they were held liable to pay the service tax amount along with penalties.

Upon reviewing the findings, the Tribunal concluded that the ultimate use of labour by the client does not determine tax liability under the service tax provisions. They emphasized that the demand under the Finance Act must be issued within the stipulated period, and there is no provision to base the 'relevant date' on the Department's knowledge acquisition date. The Tribunal found no legal justification for such an interpretation and dismissed the appeal, upholding the service tax liability and rejecting the time bar argument.

In summary, the Tribunal upheld the service tax liability of the appellant for supplying manpower to a manufacturing unit, emphasizing the applicability of Manpower Recruitment Agency services. They rejected the appellant's arguments regarding the nature of service provided and the time bar for issuing the demand notice, ultimately dismissing the appeal.