2018 (9) TMI 260 - AT - Service Tax

Man Power recruitment or Supply Agency services - it was alleged that the appellant suppressed taxable value and short paid service tax for the period from 2009-10 to 2011-12 - Principles of Natural Justice - Held that - The Original Authority did not take into consideration any defence by the appellant. The impugned order is passed in violation of principles of natural justice. Matter remanded to the Original Authority with a direction to offer the opportunity of submission of defence reply and subsequent to the same offer the opportunity of personal hearing to the appellant - appeal allowed by way of remand.

Summary

Issues:
- Service tax liability on Security Agency Service and Man Power Recruitment Agency Service
- Correct valuation of services for assessment of service tax
- Violation of principles of natural justice in passing the impugned order

Analysis:

Issue 1: Service tax liability on Security Agency Service and Man Power Recruitment Agency Service
The appeal was directed against an Order-in-Original passed by the Commissioner, Central Excise and Service Tax, Kanpur. The appellants were providing Security Agency Service and Man Power Recruitment Agency Service. The show cause notice alleged non-filing of ST-3 returns, incorrect information disclosure, suppression of taxable value, and short payment of service tax. The demand amounted to ?2.18 crores for Man Power Recruitment services and ?50.12 lakhs for Security Agency services. The Original Authority confirmed the entire demand and imposed penalties under the Finance Act, 1994. The appellant, while not disputing the liability to pay service tax, contested the valuation of services. They argued that the gross value should not have been taken for valuation, citing relevant Tribunal and Supreme Court decisions. They contended that the job performed was specific and paid according to the work done, not based on the manpower used.

Issue 2: Correct valuation of services for assessment of service tax
The appellant's representative argued that the valuation of services, especially for Security Agency services, should not be based on the gross value. They referenced previous Tribunal decisions and a Supreme Court ruling to support their contention. The appellant highlighted that the nature of the work performed by them, particularly with BHEL, did not involve manpower supply but specific job execution paid according to the work done. They relied on Tribunal decisions to emphasize their point regarding the valuation methodology for service tax assessment.

Issue 3: Violation of principles of natural justice in passing the impugned order
Upon careful examination of the case records and submissions, it was observed that the appellant did not submit any defense reply before the Original Authority. Despite being provided with an opportunity to be heard, the appellant did not appear before the Original Authority. The impugned order was passed without considering any defense by the appellant, leading to a violation of principles of natural justice. Consequently, the Tribunal held the impugned order as unsustainable and set it aside. The matter was remanded to the Original Authority with a directive to offer the appellant an opportunity to submit a defense reply and have a personal hearing within two months. The appellant was instructed to present their defense through written submissions and attend hearings as required. The appeal was allowed by remand, clarifying that no opinion on the merits was expressed, leaving all issues open for further consideration.