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2018 (4) TMI 1041 - AT - Service TaxMan Power Supply or Recruitment Agency service - employees of the appellant would be sent either to such software companies premises or to the premises of the ultimate clients for provision of software services at the client s premises - Department took the view that appellants are only supplying man power to TCS in Special Economic Zones and other similar organizations as per the requirements and that the appellants are not engaged in development of any software on their own but are only providing employees to TCS and other organizations. Held that - the appellants were only providing manpower, albeit those having software technology skills, to organizations like TCS, Infosys etc. But the information technology development was not done by the appellant themselves nor was it contracted to them - the issue in the appellant own case Future Focus Infotech India (P.) Ltd. Versus Commissioner of Service Tax 2010 (3) TMI 190 - CESTAT, CHENNAI , applies, where it was held that the appellant was supplying skilled manpower for which it was liable to pay service tax for supply of manpower services. The facts in the case of Cognizant Tech. Solutions. 2010 (3) TMI 328 - CESTAT, CHENNAI are different and will not apply to present case, as in that case Cognizant Tech. Solutions were themselves responsible for the development, information technology software etc., whereas in the present case appellants are only supplying man power to TCS in Special Economic Zones and other similar organizations as per the requirements and that the appellants are not engaged in development of any software on their own. The appellants are therefore liable for discharging tax liability on the value of taxable services in respect of these services. In respect of services provided to SEZ units - As per the overriding effect of Section 26 51 of the SEZ Act 2005 read with Rule 10 of SEZ Rules 2005, they would be eligible for exemption from payment of service tax and also for the exemption extended in Notification No.4/2004-ST dt.31.03.2004 - The adjudicating authority has not considered this claim of the appellant on the ground that sufficient documents have not been produced by the appellants - it is proper to remand the issue for reconsideration - matter on remand. Extended period of limitation - demand raised on TDS by way of a second SCN - Held that - Nothing could have prevented the department from including the demand on the TDS portion in the earlier SCN dt. 26.9.2009. Hence that part of the impugned order confirming the service tax demand of ₹ 10,52,160/- with interest and imposition of penalties in respect of TDS portion, for the period April 2007 to March 2008, will require to be set aside. Penalties - Held that - the issue in dispute is with regard to classification of the activities of the appellant and therefore an interpretational issue - all penalties set aside. Appeal disposed off.
Issues Involved:
1. Classification of services provided by the appellant. 2. Eligibility for exemption under Notification No. 4/2004-ST for services rendered to SEZ units. 3. Demand on TDS component for the period post-16.05.2008. 4. Limitation period for the demand from April 2007 to September 2007. 5. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994. Detailed Analysis: 1. Classification of Services: The primary issue was whether the appellant's activities fall under "Man Power Supply or Recruitment Agency Service" or "Information Technology (IT) services." The Tribunal concluded that the appellant was supplying skilled manpower to companies like TCS and Infosys, who utilized these personnel for their projects. The Tribunal referenced a previous decision in the appellant's own case (2010 (18) STR 308 (Tri.-Chennai)), which held that the activities were classified as "Man Power Supply or Recruitment Agency Service." The Tribunal noted that the appellants were not engaged in developing software on their own but were providing personnel to work under the supervision and control of TCS and Infosys. 2. Exemption for Services Rendered to SEZ Units: The appellant claimed exemption from service tax for services provided to SEZ units under Notification No. 4/2004-ST and Sections 26 & 51 of the SEZ Act, 2005. The adjudicating authority had rejected this claim due to insufficient documentary evidence. The Tribunal found merit in the appellant's contention and remanded the issue for de novo adjudication to verify the eligibility for exemption based on the documents provided. The appellant was allowed to submit additional documents during this process. 3. Demand on TDS Component: The demand for service tax on the TDS component for the period post-16.05.2008 was contested by the appellant. The Tribunal found that the demand raised in a second show cause notice (SCN) dated 22.04.2009 for the period April 2007 to March 2008 was time-barred. The Tribunal noted that the department could have included the TDS demand in the earlier SCN dated 26.09.2008. Therefore, the part of the order confirming the service tax demand of ?10,52,160/- with interest and penalties for the TDS portion was set aside. 4. Limitation Period: The appellant argued that the demand for the period April 2007 to September 2007 was hit by limitation, as the issue had already been addressed in previous notices. The Tribunal agreed with the appellant's contention that the second SCN was time-barred and set aside the demand for the TDS component for the period April 2007 to March 2008. 5. Imposition of Penalties: The Tribunal found that the issue in dispute was related to the classification of the appellant's activities, which is an interpretational issue. Therefore, the penalties imposed under Sections 76 and 78 of the Finance Act, 1994, were deemed unwarranted and were set aside. Summary: (i) The appellant's activities fall within the scope of "Man Power Supply or Recruitment Agency Service" as defined in Section 65 (105) (k) of the Finance Act, 1994, and are liable for service tax. (ii) The demand of ?10,52,160/- related to the TDS component for the period April 2007 to March 2008 is set aside as time-barred. (iii) The issue of exemption for services provided to SEZ units is remanded for de novo adjudication to verify eligibility based on documents. (iv) The net liability, as determined in the de novo adjudication, along with interest, is payable by the appellant. (v) All penalties imposed under Sections 76 and 78 are set aside. The appeal is disposed of accordingly.
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