2018 (9) TMI 90 - AT - Service Tax

Extended period of limitation - suppression of facts - Manpower Recruitment or Supply Agency services - whether the appellant is required to pay service tax under Manpower Recruitment or Supply Agency services? Held that - The ingredients for invoking the extended period as well as for imposing penalty under Section 78 are same - Despite change in the definition of Manpower Recruitment and Supply agency made on 16.06.2005 and the service recipient was an excisable unit therefore, there was no reason either for the appellant or for the service recipient about ignorance from changes in the law. Therefore, the reasons stated by the appellant that as per advice of their service recipient they were under bonafide belief that the services are not taxable, do not appears to be satisfactory - the appellant could not make out a case of reasonable cause for non-payment of service tax. Reliance on the provisions of Section 73(3) - Held that - This is clear from the fact of non-payment of service tax and the payment of service tax along with interest was made only after detection by the department. Moreover, the extended period was invoked on the ground of suppression of facts, therefore, as per sub-Section (4) of Section 73, the benefit of Section 73(3) is not available to the appellant. Also, the penalty was rightly imposed under Section 78 by the lower authorities. Appeal dismissed - decided against appellant.

Summary

Issues involved:
Whether the appellant is required to pay service tax under Manpower Recruitment or Supply Agency services.

Analysis:
The appellant, an individual labor contractor, supplied labor to a company and believed they were not liable to pay service tax post a change in the law. The appellant argued that they had paid the service tax with interest before any notice was issued. The appellant contended that the service recipient had availed Cenvat credit, resulting in revenue neutrality. The appellant cited various judgments to support their case.

The Revenue argued that the appellant was not ignorant of the taxability of services as they had sought advice from the service recipient, indicating no bonafide belief. The demand was raised invoking the extended period due to alleged suppression of facts by the appellant. The Revenue stated that the penalty under Section 78 was justified.

The Tribunal noted that the change in the definition of Manpower Recruitment and Supply agency was known to both the appellant and the service recipient, making the appellant's belief of non-taxability unsatisfactory. The Tribunal held that the appellant failed to establish a reasonable cause for non-payment of service tax. The Tribunal found the judgments cited by the appellant not similar to the present case. The Tribunal also ruled that the benefit of Section 73(3) was not available to the appellant due to the invocation of the extended period based on suppression of facts.

Ultimately, the Tribunal upheld the penalty imposed under Section 78 by the lower authorities, dismissing the appeal. The order was pronounced in the open court on 31.08.2018.