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2023 (12) TMI 75 - AT - Service TaxClassification of service - Supply of Manpower Service or not - Partial reverse charge mechanism - Notification No. 30/2012-ST dated 20.06.2012. Relying upon Section 68 of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012 demand has been made under partial reverse charge mechanism, treating these supplies as taxable services under the category of Manpower Supply Agency Services . HELD THAT - The invoices raised against the contracts are not for supply of labour but are for supply of material. Work done under these contracts is for undertaking a work activity involving supply of material also. Then on what basis revenue could have concluded that these activities amounted to Supply of Manpower Service to the appellant for demanding service tax - as per the General Terms and Conditions of the appellant s agreement, all these are works contract involving supply of material and labor. They cannot be in any case to be treated as supply of manpower. In the present case the demand has been made during the services received as Manpower Supply Services. On perusal of the documents and invoices it is found that in none of invoice has service tax of 25% for the supply of Manpower Services as required by the above notification has been paid by the service provider. The demand of 75% has been made by the recipient of the service. It is not available anywhere on the record whether any notices or any demands have been issued to the service provider, in terms of notification for payment of 25% of service tax for Supply of Manpower Services. The present services do not qualify as Manpower Supply Service, as it is associated with supply of material also, it is a work contract service which has been defined by Section 65 (54) of the Finance Act, 1994 as amended by Finance Act, 2012. In respect of the Works Contract Services the charge of service tax is on the service provider and not on the service recipient in terms of the above provisions. Accordingly, the demands made by the revenue by invoking the provisions of Section 68 (2) do not stand in the test of law. Accordingly, these demands are to be set aside. The contract/ agreement entered between the parties should be read as whole and understood as whole. There is no scope for interpreting the agreement differently from what has been stated in the contract/ agreement. A work contract agreement will involve supply of services for which certain manpower will be deployed. Just for the reason that the manpower was deployed by the appellant nature of agreement cannot be changed from the one that was intended between the contracting parties. There are no merits in the impugned order - appeal allowed.
Issues Involved:
1. Demand of service tax under reverse charge mechanism. 2. Classification of services as "Supply of Manpower" or "Works Contract". 3. Imposition of interest and penalties. Summary: Issue 1: Demand of Service Tax under Reverse Charge Mechanism The appellant, a State Government undertaking engaged in bridge construction, was issued a show cause notice for non-payment of service tax under reverse charge mechanism on services such as Supply of Manpower and Security Services. The demand was confirmed by the Additional Commissioner and upheld by the Commissioner (Appeals), amounting to Rs. 72,73,695/- along with interest and penalties. Issue 2: Classification of Services The appellant contended that the services procured were for specific construction-related activities and not for supply of manpower. The contracts were for jobs like pouring concrete, shuttering, curing, and reinforcement, which were supervised for quality assurance. The Commissioner (Appeals) and the adjudicating authority, however, categorized these as manpower supply services under Rule 2(g) of Service Tax Rules, 1994, based on the control and supervision exercised by the appellant's technical staff. Issue 3: Imposition of Interest and Penalties The authorities imposed penalties under Sections 77 and 78 of the Finance Act, 1994, citing non-payment of service tax. The appellant argued that as a government undertaking, there was no intent to evade tax, referencing the case of Superintendent of Post Office Vs CCE, Gauhati. Tribunal's Findings: - Contract Nature: The Tribunal examined the contracts and found that they were for executing specific works, not for supply of manpower. The contracts involved material supply and job execution, not mere manpower provision. - Legal Precedents: The Tribunal referred to various judgments, including those from the Hon'ble Allahabad High Court, which clarified that contracts involving specific job execution do not fall under "Supply of Manpower". - Reverse Charge Mechanism: The Tribunal noted that the service tax liability under reverse charge mechanism was incorrectly applied as the services were not purely manpower supply but involved works contract. - Penalty and Interest: Given the misclassification of services, the Tribunal found no basis for the imposed penalties and interest. Conclusion: The Tribunal set aside the impugned order, holding that the services received by the appellant did not qualify as "Supply of Manpower" but were part of a works contract. Consequently, the demands and penalties under the reverse charge mechanism were invalid. The appeal was allowed.
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