2023 (12) TMI 483 - AT - Service Tax

Import of service or not - reverse charge mechanism - Pure agent - service received from M/s. Bestinet, Malaysia - Appellants are authorised by Malaysian Government to conduct screening tests and bio metric registration of the persons seeking employment in Malaysia and upload the results in the web portal Foreign Workers Centralised Management Scheme (FWCMS) maintained by M/s. Bestinet SDN BHD, Malaysia - suppression of facts or not - invocation of extended period in terms of Section 73(1) of the Finance act, 1994. HELD THAT - The appellant was collecting Rs.2000/- for each prospective employee who are the service receivers which is inclusive of US 30 which is paid to M/s. Bestinet upon raising of periodical invoices on the appellant. The total demand confirmed of Service Tax during the period from September 2014 to June 2017 worked out to Rs.36,36,856/- after giving exemption for the amounts collected towards diagnostic / medical screening tests. The Service Tax liability was computed on this US 30 which is the fees collected by the appellant for biometric registration of the candidates on FWCMS. The appellant acted as an agent of the Bestinet in collecting the fees of US 30 which was paid on periodical basis to M/s. Bestinet. The invoices raised by the appellant did not indicate collection of any other amount over and above US 30 payable by each foreign worker. In view of the above findings, the nature of services rendered by the appellant were in the nature of a pure agent as far as the fees for biometric registration is concerned. The amount alleged to have been collected by the appellant over and above US 30 is only towards screening test conducted by the appellant which was already held to be exempt in the impugned Order-in-Original dated 30.06.2021 under Notification No. 25/2012-ST dated 20.06.2012. As such, the demand of Rs.36,36,856/- collected by the appellant as fees for biometric registration of foreign workers who are the ultimate service recipients and which was paid to M/s. Bestinet, cannot be sustained. As the appellant succeeds on merits there is no need to discuss about the invocation of extended period. The impugned order is ordered to be set aside - Appeal allowed.

Summary

Issues Involved:

1. Whether the service received from M/s. Bestinet, Malaysia is to be treated as import of service and consequently demand of Service Tax of Rs.36,36,856/- under reverse charge basis is justified?
2. Whether invocation of extended period in terms of Section 73(1) of the Finance Act, 1994 is maintainable or not considering the facts of the case?

Summary:

Issue 1: Import of Service and Service Tax Demand

The Medical Services Agreement between the appellant (Al-Haramain Diagnostic Centre) and M/s. Bestinet SDN BHD, Malaysia, involved the provision of hardware and software for the Foreign Workers Centralized Management System (FWCMS). The appellant paid fees for the supply, installation, and commissioning of this system. The original adjudicating authority considered this as a 'supply of tangible goods' service, but did not quantify the tax demand in the final order. The primary issue was whether the fees of US$ 15 (later US$ 30) collected for biometric registration should be subjected to Service Tax. The appellant argued that they acted as an agent for M/s. Bestinet and that the foreign workers were the actual service recipients. The appellate authority concluded that the appellant and M/s. Bestinet collaborated to provide the service, making the foreign workers the service recipients. The appellant did not collect any additional consideration for biometric registration, thus the demand of Rs.36,36,856/- for Service Tax was not justified. The appellant succeeded on merits, negating the need for further discussion on the extended period.

Issue 2: Invocation of Extended Period

The appellant contended that the extended period for demand under Section 73(1) of the Finance Act, 1994, was not applicable as there was no intent to evade duty. They relied on various judicial precedents to argue that mere non-declaration or failure to pay duty due to a bona fide belief does not constitute suppression of facts. The appellant maintained that all relevant information was disclosed to the authorities, and there was no deliberate withholding of information. Given the findings on the merits of the case, the invocation of the extended period was not necessary to address.

Conclusion:

The impugned order was set aside, and the appeal was allowed with consequential reliefs as per law. The appellant's collection of fees for biometric registration, which was paid to M/s. Bestinet, was not subject to Service Tax under the reverse charge mechanism. The appellant was deemed to act as a pure agent for the biometric registration service, and the amounts collected for screening tests were exempt under Notification No. 25/2012-ST dated 20.06.2012.