2020 (1) TMI 638 - AT - Service Tax

Business Support Service - Business Auxiliary Service - appellant was collecting service tax from the clients from day one and not depositing the amount so collected with the department - Benefit of N/N. 30/2012 dated 20/06/2012 - out-of-pocket expenses and reimbursable expenses - extended period of limitation - HELD THAT - In this case, the appellant is collecting service tax from their clients from day one. Therefore, they are not entitled to the benefit of threshold exemption for the first year and service tax is rightly demanded from them. As they have charged service tax from their clients from day one, the amount of service tax collected from the clients is required to be deposited with the department. The appellant is charging service tax @ 25% of the service provided by them on manpower recruitment and supply agency service and is entitled for the exemption N/N. 30/2012 dated 20/06/2012. Further, out-of-pocket expenses are exempted in full as per the said notification. The said benefit has already been granted by the Learned Commissioner (Appeals) in the impugned order. The amount of service provided by the appellant shall be treated as cum-tax, if the same is shown in the balance sheet as whole of the invoice price. The adjudicating authority is directed to quantify the demand as directed herein above and if some amount is payable by the appellant the same shall be paid by the appellant within 30 days along with interest after quantification of the demand of the service tax by the adjudicating authority - Penalty u/s 78 upheld. Appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant is entitled to threshold limit exemption and other exemptions for the services provided?
2. Whether the appellant is liable to pay service tax on the whole amount collected from clients?
3. Whether the appellant is entitled to exemption under Notification No. 30/2012 for specific services?
4. How should the amount of service provided by the appellant be treated in the balance sheet?
5. What penalties or liabilities, if any, does the appellant face?

Analysis:

1. The appellant, engaged in Business Support Service and other services, faced an investigation based on the balance sheet figures. It was found that the appellant collected service tax from clients but did not deposit it with the department. A show cause notice was issued invoking extended limitation to demand service tax. The adjudication confirmed demands, denying exemptions claimed. The Commissioner (Appeals) allowed deductions for 'out-of-pocket' and 'reimbursable expenses' but remanded for quantification. The appellant contended for threshold exemption and full exemption under Notification No. 30/2012 for specific expenses.

2. The appellant argued for threshold exemption for the first year and full exemption under Notification No. 30/2012 for certain expenses. The department opposed, stating the appellant collected service tax from day one, thus not entitled to exemptions. The Tribunal held the appellant not eligible for the first-year threshold exemption due to collecting service tax from clients immediately. The appellant was directed to pay service tax on the total amount collected from clients and to deposit the same with the department.

3. The Tribunal found the appellant entitled to exemption under Notification No. 30/2012 for 'manpower recruitment and supply agency service' and full exemption for 'out-of-pocket expenses'. The benefit of these exemptions was confirmed by the Commissioner (Appeals). The appellant's argument that the entire service amount should be treated as cum-tax was considered, with specific services being subject to different tax rates and exemptions.

4. The Tribunal directed the adjudicating authority to quantify the demand, ensuring any payable amount is settled within 30 days along with interest. The appellant was also held liable for penalties under Section 78 of the Act, if applicable. The judgment concluded by disposing of the appeal with the specified terms, emphasizing the appellant's obligations to pay the determined service tax amount promptly and meet any associated penalties.

End of Analysis