2018 (9) TMI 1729 - AT - Service Tax

Man Power Recruitment Agency and Supply Service - appellant have deputed the employees to their sister concern or units and collected deputation charges from the latter - Held that - The scope of service tax liability in respect of the activity of staff to subsidiary / group companies is no longer res integra - The Hon ble High Court in the case of CST Vs Arvind Mills Ltd. 2014 (4) TMI 132 - GUJARAT HIGH COURT , has held that subsidiary companies cannot be said to be client of holding company and the deputation of employees was only for and in the interest of the company; there is no relation of agency and client. Section 73 (3) of the Finance Act, 1994 - Held that - In the present case, a SCN has very much been issued and the adjudication thereof has culminated in confirmation of the demand. At such a later stage, if the LAA finds that demand is time-barred, he should only set aside the demand on that ground but cannot advise assessee concerned to discharge the disputed amount through Section 73 (3) ibid - assessee cannot be said to be discharge the disputed amount through Section 73 (3) ibid. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the assessee is liable to pay service tax for Man Power Recruitment or Supply Agency Service (MRSA) during 2005-06 and 2006-07.
2. Whether the demand of service tax along with interest could be settled under Section 73 (3) of the Finance Act, 1994.
3. Whether the Commissioner (Appeals) correctly set aside the demand on time-bar for certain services provided by the assessee.

Analysis:
1. The case involved the issue of whether the assessee was liable to pay service tax for MRSA during 2005-06 and 2006-07 for deputing manpower to their clients. The department issued a show cause notice proposing a demand of service tax, which was confirmed by the original authority. However, the Commissioner (Appeals) accepted the submission of the assessee that there was no relationship of service provider and service recipient for certain group companies, hence they were not liable for service tax. The lower appellate authority found that the services provided to group companies did not fall under the category of MRSA services. The Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the department's appeal, citing the precedent set by the Hon'ble High Court in a similar case.

2. The Tribunal examined whether the demand of service tax along with interest could be settled under Section 73 (3) of the Finance Act, 1994. The Commissioner (Appeals) had advised the assessee to pay up the amount under this section, but the Tribunal clarified that this option is typically exercised at the initial stage when the liability is brought to notice. Since a show cause notice had already been issued and adjudicated upon, the Tribunal set aside the portion of the order advising the assessee to settle the amount under Section 73 (3) and allowed the assessee's appeal on this issue.

3. The Commissioner (Appeals) had set aside the demand on time-bar for certain services provided by the assessee to Lapross Engineering Ltd. However, the lower appellate authority had advised the assessee to settle the service tax under Section 73 (3) of the Act. The Tribunal found this advice to be incorrect as it should only be done at the initial stage, not after adjudication. Therefore, the Tribunal allowed the assessee's appeal on this issue and set aside the portion of the order advising the settlement under Section 73 (3).

In conclusion, the Tribunal allowed the assessee's appeal related to the liability for MRSA services, dismissed the department's appeal, and set aside the advice to settle the service tax under Section 73 (3) for certain services due to time-bar considerations.