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2023 (8) TMI 1048 - AT - Service TaxValuation of services - Manpower Recruitment or Supply Agency service - inclusion of consideration for salary, EPF and ESI as gross value of taxable services in terms of Section 67 of Finance act 1994 - time limitation - HELD THAT - It is not the case of the Department that the appellant is separately recovering the charges towards wages, EPF, ESI etc. and that the same are not reimbursable deductions - it is found that though the agreement is on the basis of perkilometer per-person provided by the appellants to M/s PRTC, it is the PRTC who have also indicated the wages, PF etc. to be paid by the appellants. Notwithstanding the fact that the contract or the offer letter issued by PRTC does not indicate the wages etc. separately, the circular issued by them indicates the same. It is not the claim of the Department that such wages, PF etc. are not paid by the appellants or not paid in full by the appellants. Therefore, it is opined that they are in the nature of the reimbursable expenses and cannot be termed to be expenditure incurred by the appellants in the course of provision of the service. Moreover, going by the latest decision of the Tribunal in the case of M.P. Security Force 2019 (8) TMI 211 - CESTAT NEW DELHI , it is found that wages, EPF, ESI etc. cannot be included for the purpose of arriving at the value of taxable service for the purpose of Service Tax Valuation Rules. Extended period of limitation - HELD THAT - vide a catena of judgments including that of PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT , it was held that mere non-obtaining of registration; non-filing of returns and nonpayment of service tax does not constitute a suppression with intent to evade service tax in order that extended period is liable to be invoked; there should be a positive act on the part of the assessee to show that there is such suppression or mis-statement etc. with intent to evade service tax. In the instant case, the Department has not adduced any evidence to this effect other than bare averment that extended period is invokable - Therefore, in view of the judgments, it is opined that in the facts of the impugned case, extended period cannot be invoked and the appellants succeed on limitation also. The appellants contended that they are not a Commercial Concern during the period 01.04.2006 to 30.04.2006 - HELD THAT - This issue pertains to only a small period and as the appellants succeed both on merits and limitation, any discussion on this count is redundant. Appeal allowed.
Issues Involved:
1. Classification of services provided by the appellant. 2. Inclusion of salary, EPF, and ESI in the gross value of taxable services. 3. Applicability of "pure agent" concept. 4. Taxability of services provided before 01.05.2006. 5. Invocation of extended period for demand due to alleged suppression. Summary: 1. Classification of Services: The appellants provided drivers, conductors, and workshop personnel to M/s Punjab Road Transport Corporation (PRTC) under a contract. The Revenue classified these services as "Manpower Recruitment or Supply Agency" under Section 65(68) of the Finance Act 1994, leading to a show cause notice for recovery of Service Tax amounting to Rs 70,77,922/-. The Commissioner confirmed a demand of Rs.63,50,280/- after allowing cum-duty benefits, along with penalties under Sections 78 and 77. 2. Inclusion of Salary, EPF, and ESI: The appellants argued that salary, EPF, and ESI should not be included in the gross value of taxable services as per Section 67 of the Finance Act 1994. They cited the Supreme Court's decision in Inter-Continental Consultants and Technocrats Pvt. Limited, which held Rule 5 of Service Tax (Determination of Value) Rules, 2006 as ultra vires of Section 67. The Tribunal referred to its decision in M.P. Security Force, holding that contributions towards PF and ESI should not be included in the gross amount if deposited with the government. 3. Applicability of "Pure Agent" Concept: The appellants claimed they acted as a "pure agent" of PRTC, and reimbursable expenses should not be included in the taxable value. The Revenue countered that the appellants did not enter into a contract as pure agents and PRTC was merely a client. The Tribunal found that wages and other statutory contributions indicated by PRTC should be treated as reimbursable expenses and not included in the assessable value. 4. Taxability Before 01.05.2006: The appellants contended that they were not a "Commercial Concern" and thus not taxable before 01.05.2006. The Revenue cited Tribunal decisions indicating that a proprietary firm engaged in commercial activity qualifies as a "Commercial Concern." However, the Tribunal deemed this issue redundant as the appellants succeeded on both merits and limitation. 5. Invocation of Extended Period: The appellants argued that the issue was time-barred, asserting a bona fide belief based on PRTC's circular that wages and deductions were not taxable. The Tribunal held that mere non-registration, non-filing of returns, and non-payment of service tax do not constitute suppression with intent to evade tax. The Department failed to provide evidence of deliberate suppression, leading the Tribunal to rule that the extended period could not be invoked. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants on both merits and limitation.
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