2017 (10) TMI 406 - AT - Service Tax

Manpower Recruitment Supply Agency Services - deputation of the staff of the appellant under which the appellants staff are deputed for carrying out various work to their group/associate companies - Held that - reliance placed on the Judgment of Hon ble Gujarat High Court in the case of Commissioner of Service Tax Vs. Arvind Mills Ltd. 2014 (4) TMI 132 - GUJARAT HIGH COURT , where it was held that the deputation of employee of the appellant to their group companies will not amount to providing services - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Classification of services for taxation, applicability of service tax on deputation of staff to group companies, time-barred demand, legal entity distinction between service provider and recipient.

Classification of services for taxation:
The case involved the appellant receiving professional charges for deputation of staff to group companies. The appellant started paying service tax from 16.5.2008 under Manpower Recruitment Supply Agency Services category. However, for the period April 2005 to May 2008, the service tax was not discharged. The show cause notice classified the service under manpower recruitment and supply agency services, leading to a demand for service tax for the period 2005-06 to 2007-08. Penalties under Section 76, 77, and 78 of the Finance Act were imposed. The appellant contended that the issue was similar to previous judgments and the demand was time-barred.

Applicability of service tax on deputation of staff to group companies:
The appellant argued that the deputation of employees to group companies did not amount to providing services based on previous judgments. The Tribunal referred to a judgment based on the case of Commissioner of Service Tax Vs. Arvind Mills Ltd., where it was held that deputation of employees to group companies did not fall under the category of Management Consultancy Service. The Tribunal found that the service tax paid by the appellant was not liable to be taxed under any category of services as determined by the lower authorities.

Time-barred demand:
The appellant contended that the demand was time-barred as it was for a period subsequent to previous cases. The Tribunal considered this argument along with the issue of classification of services and held that the demand was not sustainable based on previous judgments and allowed the appeal.

Legal entity distinction between service provider and recipient:
The Revenue argued that the appellant and the service recipient were distinct legal entities, creating a relationship of service provider and client. However, the Tribunal found that the deputation of employees to group companies did not amount to providing services, as established in previous judgments, and set aside the impugned order, allowing the appeal with consequential relief.

The judgment highlighted the importance of previous case law in determining the classification of services for taxation and emphasized that the deputation of employees to group companies did not constitute providing services under the relevant tax category. The Tribunal's decision was based on established legal principles and previous rulings, ultimately setting aside the demand for service tax and penalties imposed on the appellant.