2017 (6) TMI 863 - AT - Service Tax

Manpower Recruitment and Supply Agency Service - Erection, Commissioning and Installation service - reverse charge mechanism - Held that - parent Company is a Manpower Recruitment and Supply Agency. Prima-facie, the demand of service tax under Manpower Recruitment and Supply Agency Service is not sustainable against the applicant - waiver of pre-deposit on account of demand under Manpower Recruitment and Supply Agency Service is granted. The demand has been confirmed against the applicant under the category of Erection, Commissioning and Installation service. The supplier of plant and machinery is not engaged in the activity of Erection, Commissioning and Installation Services of plant and machinery. In fact, the said work has been done by an independent agency and the supplier has only supervised the work - the applicant is not liable to pay service tax on the activities of supervision of Erection, Commissioning and Installation of plant and machinery. Waiver of pre-deposit of entire amount of service tax, interest and penalty are granted - appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of service tax demand under Manpower Recruitment and Supply Agency Service and Erection, Commissioning, and Installation service.
2. Applicability of service tax under reverse charge mechanism.
3. Validity of demand under Manpower Recruitment and Supply Agency Service.
4. Liability for service tax under Erection, Commissioning, and Installation service.
5. Waiver of pre-deposit of demands confirmed.

Analysis:

1. The Tribunal confirmed the service tax demand against the applicant under the categories of Manpower Recruitment and Supply Agency Service and Erection, Commissioning, and Installation service, along with interest and penalties. The applicant, a new unit in India manufacturing motor vehicles, had employees sent by the parent Company from Japan. The Revenue claimed the employees fell under Manpower Recruitment and Supply Agency Service and demanded service tax under reverse charge mechanism. Additionally, for Commissioning and Installation of plant and machinery, service tax was sought under the category of Erection, Commissioning, and Installation Services. The Tribunal considered the submissions made by both parties.

2. Regarding the demand under Manpower Recruitment and Supply Agency Service, the Tribunal referred to a decision of the Hon'ble Gujarat High Court in a similar case. The Court observed that for such a demand to be valid, the agency must be engaged in that service. The Tribunal found that the parent Company was not a Manpower Recruitment and Supply Agency, leading to the view that the demand of service tax under this category was not sustainable. Consequently, waiver of pre-deposit on this demand was granted.

3. Concerning the demand under Erection, Commissioning, and Installation service, the Tribunal noted that the supplier of plant and machinery was not directly engaged in these activities. Instead, an independent agency carried out the work, with the supplier only supervising. Referring to a previous Tribunal case and a subsequent High Court affirmation, the Tribunal concluded that the applicant was not liable to pay service tax on the supervision activities related to Erection, Commissioning, and Installation of plant and machinery. Therefore, waiver of pre-deposit of the entire amount of service tax, interest, and penalty was granted to the applicant until the appeal's disposal.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each matter, including the reasoning behind the grant of waiver of pre-deposit for the confirmed demands.

← Previous Next →