2019 (1) TMI 1436 - AT - Service Tax

Levy of service tax - deputation of employees the corporate group - amount paid by one company in the corporate group to another - whether coming within the scope of service or not - no consideration - Held that - The definition of taxable service was amended during the period in dispute to substitute commercial concern with any person - The rendering of service, to be taxable, is no longer restricted to such concerns as are professionally engaged in manpower recruitment and supply. The finding of the Hon ble Supreme Court in Intercontinental Consultants and Technocrats Pvt Ltd 2018 (3) TMI 357 - SUPREME COURT OF INDIA that the inclusion of value in section 66 imposing the tax on service restricted the scope of value to the service itself till the subsequent incorporation of Explanation in section 67 of Finance Act, 1994 would also lead to the further conclusion that levy of tax is permitted by law contingent upon there being a value inherent as consideration for the service and not a provision of service gratis to which a value could be assigned under the relevant Rules. There is no allegation in the SCN, or in the impugned order, that the appellant had retained any amount from out of the payment received from the group company, thus, discrediting the receipt of any consideration by the appellant. There is no provision in the relevant rules for computing the value in the absence of consideration even though provisions exist for monetising consideration other than in money. Absence of consideration is not the same as uncountable consideration requiring rules for conversion. In the absence of any consideration, there is no taxable service and, in the absence of taxable service, leviability of duty would not arise - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Taxability of amount paid between companies in a corporate group under the definition of taxable service.

Detailed Analysis:

Issue 1: Taxability of amount paid between companies in a corporate group under the definition of taxable service
The case involved M/s Hardesh Ores Pvt Ltd appealing against an order from the Commissioner of Customs, Central Excise & Service Tax, Goa regarding the taxability of amounts paid by one company in a corporate group to another. The dispute arose from the deputation of surplus employees to another company within the same group. The adjudicating authority found the transaction liable to tax under section 65(105)(k) of the Finance Act, 1994, related to 'manpower recruitment or supply agency service'. The appellant argued citing precedents like Arvind Mills Ltd and Spirax Marshall Pvt Ltd, emphasizing the non-taxability of such transactions. On the other hand, the Authorized Representative referred to decisions like Laxmi Construction and Neelav Jaiswal & Brothers to support the taxability. The Tribunal noted the amendments to the definition of taxable service post-June 2005, which broadened the scope beyond 'commercial concerns' to 'any person', rendering the earlier decisions inapplicable. The Tribunal also highlighted the absence of precedent directly addressing the issue, necessitating an examination of the Finance Act, 1994 provisions. The Tribunal ultimately ruled in favor of the appellant, emphasizing the absence of consideration retained by the appellant, which is crucial for tax liability determination.

Judgment Summary:
The appellate tribunal, CESTAT Mumbai, deliberated on the taxability of amounts paid between companies in a corporate group under the definition of taxable service. The case involved the deputation of employees from M/s Hardesh Ores Pvt Ltd to another company within the same group. The tribunal analyzed precedents and amendments to the Finance Act, 1994, to determine the tax liability. Ultimately, the tribunal ruled in favor of the appellant, emphasizing the absence of consideration retained by the appellant, which is essential for tax liability.