2024 (6) TMI 1113 - AT - Service Tax

Levy of service tax - Manpower Recruitment and Supply Agency Services - secondment of employees by the Appellant to its associated/related Company at United Kingdom on reverse charge mechanism - extended period of limitation - HELD THAT - Argument is led by both sides with reference to provision of law and judicial decisions on the point but ultimately the consensus that emerged is that in view of Hon'ble Supreme Court judgment on the issue, as passed in the case of C.C.,C.E. S.T. BANGALORE (ADJUDICATION) ETC. VERSUS M/S NORTHERN OPERATING SYSTEMS PVT LTD. 2022 (5) TMI 967 - SUPREME COURT , secondment of employees by overseas entity for the purpose of completion of Assessee s job amounts to manpower supply and Assessee was service recipient for the same and, therefore, demand was sustainable but invocation of extended period was impermissible as Assessee had bonafide believe that it was not liable to pay any Service Tax, apparently for the reason that judicial decision on the similar line till pronouncement of Northern Operating Systems Pvt. Ltd. judgement by the Hon'ble Supreme Court was holding the field. But in the present case it could be noticed that show-cause notice was issued on 14.10.2014 up to the end of financial year 2011-12 and in view of clear provision contained in Section 73(1) read with 73(6), the normal period for making demand through show-cause notice was 18 months from the relevant date unless any fraud, collusion, wilful misstatement, suppression of facts, contravention of any of the provisions of this Chapter or the Rules made thereunder with intent to evade payment of Service Tax is noticed, Central Excise Officer can serve notice for demand that could be extended up to 5 years. This being the statutory provision, the notice of demand being signed on 14.10.2014 and dispatched thereafter cannot be considered to have been sent within 18 months of the end of financial years up to which demand is made i.e. up to 31st March 2012, against which Service Tax Return was filed on 24.04.2012 - the show-cause notice is not issued in conformity to the law and, therefore, it was required to be quashed before initiation of adjudication proceeding. The demand, apart from being barred by the period of limitation, is also unsustainable for the extended period and since no demand is due for the normal period - the order passed by the Commissioner of Service Tax Commissionerate, Pune is hereby set aside - Appeal allowed.

Summary

Issues:
Confirmation of Service Tax demand on secondment of employees to the UK under "Manpower Recruitment and Supply Agency Services" challenged by the Appellant.

Analysis:
The case involved the Appellant contesting the confirmation of a Service Tax demand of Rs. 1,78,92,239 along with interest and equal penalty for seconding employees to its associated company in the UK. The Appellant was found to have remitted a significant amount to the UK during the financial years 2009-10 to 2011-12. The Appellant, a 100% exporter of 'Business Support Service', was a subsidiary of Aviva Group, with a parent company in the UK. The Appellant had an agreement with a UK company for recruiting employees, and the issue was categorized as "Manpower Recruitment and Supply Agency Services" on secondment. The demand was based on alleged suppression of non-payment of Service Tax, leading to a show-cause notice in 2014 for the years in question.

During the hearing, arguments were presented by both sides regarding the legal provisions and judicial precedents. Reference was made to a Supreme Court judgment in a similar case, establishing that secondment of employees for completing the Assessee's job constituted manpower supply, making the Assessee the service recipient. However, it was noted that the invocation of the extended period for demand was impermissible in this case. The statutory provision allowed for an extended period of up to 5 years for demand if certain conditions were met, but the show-cause notice in this instance was issued beyond the normal 18-month period, rendering it non-compliant with the law.

Additionally, the Appellant argued that since they had filed their return within the prescribed period, the demand was also barred by limitation. The relevant statutory provision was cited to support this argument, stating that the period for determining the "relevant date" for limitation purposes ended before the notice was issued, making the demand unsustainable. The Tribunal agreed with the Appellant's contentions, ruling that the demand was not only barred by limitation but also unsustainable for the extended period. Consequently, the appeal was allowed, and the original order confirming the demand was set aside with any consequential relief.

In conclusion, the Tribunal's decision was based on the non-compliance of the show-cause notice with statutory provisions regarding the limitation period and the unsustainable nature of the demand for both the normal and extended periods. The Appellant's arguments regarding the legality of the notice and the limitation period were upheld, leading to the setting aside of the Service Tax demand.