2018 (3) TMI 639 - AT - Service Tax

Works contract - construction activity for providing parking facility for Commonwealth Games-2010 - appellant entered into an agreement with Municipal Corporation of Delhi (MCD) for Covering of Sunehari Nallah from Lala Lajpat Rai Marg (Behind Lodhi Road Hotel) to Dayal Singh College along Lodhi Road covering of Kushak Nallah from Jawaharlal Nehru Stadium (South Gate) to IVTH Avenue Road, Lodhi Road, Lodhi Colony, for providing parking facility for Commonwealth Games-2010 - Revenue entertained a view that the said construction activity will be covered for service tax liability under works contract service for the period 2007- 08 to 2011-12 - manpower services provided to group company of the appellant. Held that - WCS covers only civil structures which are for commerce or industry. Admittedly, the creation of present facility by the MCD using the services of the appellant is for Commonwealth Games. It is clear that the said games were organized and conducted by the Govt. involving participation of large number of countries. Such sport event and the structure created for such sport event cannot be considered as commercial or industrial venture. Though the subsequent use of the facility created should not have any implication on the question of tax liability which should be with reference to status of the facility at the time of provision of service, we note that, even here, the clarification issued by SDMC supports the case of appellant - demand set aside. Manpower services - appellants have deputed some of their employees to their subsidiary group company - Held that - deputing employees to group company cannot be considered as supply of manpower. The appellants categorically asserted that they continued to control the deputed employees and have only got reimbursement of actual cost for such deputation - service tax liability do not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Service tax liability under 'works contract service' for construction activity.
2. Service tax liability on manpower services provided to a group company.

Analysis:

Issue 1: Service tax liability under 'works contract service' for construction activity
The appellant entered into an agreement with the Municipal Corporation of Delhi for constructing parking facilities for the Commonwealth Games-2010. The Revenue claimed service tax liability for the period 2007-08 to 2011-12. The original authority confirmed a substantial service tax liability along with penalties. The appellant contended that the construction was solely for the Commonwealth Games and not for commercial purposes, thus not falling under 'works contract service.' The Tribunal noted that the facility was used for the games and later for public purposes, not commercial or industrial activities. The order erred in presuming commercial usage, leading to an incorrect tax liability under 'works contract service.' The Tribunal found the impugned order legally unsustainable and set it aside, allowing the appeal.

Issue 2: Service tax liability on manpower services provided to a group company
The appellant deputed some employees to a subsidiary company, with expenses reimbursed by the subsidiary. The appellant argued they were not a manpower supply service industry and cited precedents to support their stance. The Revenue claimed tax liability, alleging no employer-employee relationship between the deputed employees and the appellant. The Tribunal found that the appellant controlled the deputed employees, received only actual cost reimbursement, and was not in the business of manpower recruitment. Relying on legal precedents, the Tribunal ruled in favor of the appellant, stating that deputing employees to a group company did not constitute manpower supply services. Consequently, the service tax liability on this issue was deemed unsustainable, and the impugned order was set aside, allowing the appeal.