2019 (7) TMI 1258 - AT - Service Tax

Classification of services - supply of manpower services or not - period prior to 31.03.2010 - extended period of limitation - HELD THAT - The appellant has entered into an agreement for execution of various works for the principal CPP. The payment for such work is based on the volume of the work executed and not according to the number of workman deployed by the appellant. The principal-CPP has discharged their obligation under the provisions of ESI Act and EPF Act. The same does not lead to the inevitable conclusion that the appellant has supplied labourers but has entered into colourable contracts to avoid the liability of service tax - the show cause notice is not maintainable as the same is based on the presumption, having no sanctity of law. Extended period of Limitation - HELD THAT - There is no case of any contumacious conduct, suppression or falsification of records on the part of the appellant. Further, whatever service tax the appellant would have paid was available to the principal CPP as the cenvat credit, as they have discharged central excise liability for their manufactured goods paper/paper pulp - extended period is not invokable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of the appellant to pay service tax under the classification "supply of manpower" for the period before 31.03.2010.
2. Validity of the show cause notice for invoking the extended period of limitation.

Analysis:

(i) Liability of the Appellant to Pay Service Tax:
The appellant, engaged in various works for a principal company, raised invoices based on the volume of work executed, not the number of workers deployed. The agreements were for specific tasks like wood handling and maintenance, with payments linked to work volume. The adjudicating authority alleged the appellant supplied manpower due to payments made by the principal for ESI and PF of workers. However, labor laws place liability on the principal employer for such contributions. The Tribunal held that the show cause notice was flawed, as it presumed labor supply without legal basis.

(ii) Validity of Show Cause Notice:
The Tribunal found no evidence of contumacious conduct or record falsification by the appellant. The appellant's decision to pay service tax later, under pressure from the principal, did not imply past liability. The Tribunal ruled that the extended period for tax demand was inapplicable. The appellant's payment of service tax would have been available to the principal as cenvat credit, as they had discharged central excise liability for their products. Consequently, the show cause notice was deemed unjustifiable, and the appeal was allowed, setting aside the impugned order.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT New Delhi highlights the key issues, legal arguments, and conclusions reached by the Tribunal regarding the liability of the appellant for service tax and the validity of the show cause notice.