2018 (1) TMI 1217 - AT - Service Tax

Manpower recruitment and supply agency service - appellants in their course of business deputed some of their personnel to their group companies - Held that - The issue stands decided by the decision by the decision of the Hon ble High Court of Gujarat in the case of Arvind Mills Ltd. 2014 (4) TMI 132 - GUJARAT HIGH COURT , where it was held that It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of activities as management consultancy service or manpower recruitment and supply agency service.
2. Applicability of service tax on reimbursement of salaries.
3. Confirmation of demand under manpower recruitment or supply agency service.
4. Interpretation of relevant legal provisions and case laws.

Issue 1: Classification of activities
The case involved determining whether the activities of deputing employees to group companies fell under management consultancy service or manpower recruitment and supply agency service. The appellants argued that the deputation of employees did not constitute manpower recruitment and supply agency service. They cited various case laws to support their contention. The department, however, maintained its stance as per the impugned order.

Issue 2: Applicability of service tax
The appellants received reimbursement of salaries for deputing their personnel to client companies but did not discharge service tax on such reimbursements. The original authority confirmed the service tax liability, and the Commissioner (Appeals) upheld the demand. The issue of whether service tax was applicable on such reimbursements was a key point of contention in the case.

Issue 3: Confirmation of demand
The original authority confirmed the demand under manpower recruitment or supply agency service for a specific period, along with interest and penalties. The Commissioner (Appeals) upheld this confirmation for the subsequent period. The aggrieved appellants challenged this decision before the Tribunal, leading to a detailed examination of the demand confirmation under the said service category.

Issue 4: Interpretation of legal provisions
The Tribunal analyzed the relevant legal provisions and case laws, including the decision of the Hon'ble High Court of Gujarat in a similar case. The Tribunal referred to the definition of Manpower Supply Recruitment Agency and the factual circumstances of the case to determine the applicability of the service tax. Citing precedents and legal interpretations, the Tribunal concluded that the demand was unsustainable and set aside the impugned order, allowing the appeal with consequential reliefs to the appellants.

In conclusion, the judgment delved into the classification of activities, applicability of service tax, confirmation of demand under a specific service category, and the interpretation of legal provisions and case laws to arrive at a decision favoring the appellants based on the presented facts and legal precedents.