2021 (10) TMI 1174 - AT - Service Tax

Levy of service tax - Recruitment Services - Office Services - activity of arranging or facilitating recruitment of student in India - services naturally bundled in the ordinary course of business or not - HELD THAT - It is undisputed that the appellant has an agreement only with IDP Australia. The appellant recruits or facilitates students in India, but does not get any remuneration from Australian universities. For the students who are recruited or admitted by the university in Foreign Country, recommended by appellant in India, IDP Australia gets paid by the Australian/Foreign universities. A share of that commission is given to the appellant by IDP Australia. This scheme of arrangement clearly shows that the IDP Australia is providing services to the foreign universities and is receiving consideration for the same. Recruitment of students in India - HELD THAT - IDP Australia has created the appellant as a fully owned subsidiary, and has sub- contracted this work to the appellant. Nothing has been brought on record in the show cause notice or in the order to show that the appellant has a direct contract with the foreign universities. There is nothing on record to show that the appellant is liasioning or acting as intermediary between the foreign universities and IDP Australia. All that is evident from the records is that the appellant is providing the services which have been sub-contracted to it by M/s IDP Australia. As a sub contractor, it is receiving commission from the main contractor for its services. The main contractor, IDP Australia, in turn, is receiving commission from the foreign universities who pay a percentage of the tuition fee to IDP Australia - Revenue has not established that the appellant is acting as an intermediary between M/s IDP Australia and the foreign universities, as alleged or held in the impugned order and the show cause notice. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of service tax for the period 1.4.2014 to 30.9.2015.
2. Classification of the appellant as an intermediary.
3. Imposition of penalties under Section 76 and Section 77 of the Finance Act.
4. Invocation of the extended period of limitation.
5. Allegation of res adjudicata regarding the settled issue.

Analysis:

Issue 1:
The appeal challenges the demand of service tax amounting to ?5,92,82,145 for the period 1.4.2014 to 30.9.2015. The impugned order dropped the demand for the extended period, which is not in dispute.

Issue 2:
The main contention revolves around the classification of the appellant as an intermediary. The Department argued that the appellant acted as an intermediary between IDP Australia and foreign universities. However, the Tribunal found that the appellant did not have a direct contract with the foreign universities and was merely a sub-contractor of IDP Australia, receiving commission for services provided in India. The Tribunal ruled in favor of the appellant on merits, as it was not acting as an intermediary.

Issue 3:
Penalties under Section 76 and Section 77 of the Finance Act were imposed in the impugned order. The appellant contested the demand on both merit and limitation grounds. The Tribunal set aside the penalties along with the demand, as it found the demand itself was not sustainable.

Issue 4:
The show cause notice invoked the extended period of limitation, which was later dropped in the impugned order. This issue became irrelevant as it was no longer in dispute.

Issue 5:
The appellant argued that the Department changing its view on the same issue, which was previously settled, was hit by the principle of res adjudicata. The Tribunal agreed and set aside the impugned order, emphasizing that issuing a show cause notice on a settled issue was not sustainable.

The Tribunal's detailed analysis highlighted the lack of evidence establishing the appellant as an intermediary and the inconsistency in the Department's approach, ultimately leading to setting aside the impugned order and allowing the appeal with consequential relief.