2006 (4) TMI 29 - Commissioner - Service Tax

Service Tax Manpower Recruitment Agency Appellants were not commercial concern for the purpose of charging service tax under the category Manpower recruitment Agency Reasonable cause for failure to register accepted by authority Demand for extended period not reasonable

Summary

Issues:
1. Whether the Indian Institute of Management can be considered a "Commercial Concern" for Service Tax purposes under the category of "Manpower Recruitment Agency."
2. Whether the department was justified in invoking a larger period of five years under Section 73 of the Finance Act, 1994.

Analysis:
1. The appeal was filed against a demand for Service Tax by the Joint Commissioner of Service Tax, Bangalore, on the basis that the activities of the Indian Institute of Management (IIM) fell under the category of "Manpower Recruitment Agency." The institute argued that it was not a commercial concern and cited relevant case laws to support its position. The Adjudicating Authority found IIM liable for Service Tax and concluded that the institute should have registered under the category of Manpower Recruitment Agency. The appeal contended that IIM's recruitment activities were ancillary to its educational objectives and not commercial. The appellate authority analyzed the definition of "Commercial Concern" and various legal dictionaries to determine that a commercial concern must be engaged in trade or commerce with a profit motive. It was held that IIM, being an educational institution focused on education rather than profit-making, did not qualify as a commercial concern under the Service Tax provisions.

2. The appellate authority also addressed the issue of the department invoking a larger period of five years under Section 73 of the Finance Act, 1994. It was noted that the show cause notice did not allege fraud or suppression of facts to evade payment of service tax. Additionally, the authority acknowledged that IIM had a reasonable cause for not registering to pay service tax on the disputed service. Therefore, demanding service tax for an extended period of five years was deemed unjustified. Consequently, the impugned Order-in-Original was set aside, and the appeal was allowed in favor of IIM.