2025 (1) TMI 1206 - AT - Service Tax

Benefit of reduced service tax liability in terms of N/N. 30/2012-ST dated 20.03.2012 - appellant is a cooperative society - service tax on amounts received as reimbursements such as salaries to guards PF and ESI - Invocation of Extended period of limitation. The demand of service tax denying appellant the benefit of N/N. 30/2012 date 20.03.2012 - HELD THAT - The table given in the notification Para B thereof the Entry No. 8 exempts the services provided by way of supply of manpower for any person to the extent of 75% which has to be paid by the service recipient. The appellant admittedly is a co-operative society registered under Rajasthan Co-operative Society Act 2001. The copy of certificate of registration is also produced by the appellant. There is no evidence to the contrary by the department. In the light of above observations with respect to N/N. 30/2012 the appellant being a co-operative society was very much eligible for the abatement/exemption of 75% of the tax liability. The Order-in-Original has denied the said exemption holding the appellant is not the Association of Person . The said comparison is not required for the purpose of the impugned notification. It is an admitted fact that 25% of tax liability has been discharged by the appellant. In light of this discussion the confirmation of remaining 75% of the gross value as service tax from appellant is not sustainable. The demand of service tax on the amount claimed to have been received as pure agent and reimbursable - HELD THAT - The issue stands already decided by Hon ble Supreme Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT . In light of the said decision the demand on the amount received as pure agents or on the amount of reimbursement is also not sustainable. Order to that extent is also liable to be set aside. Invocation of Extended period of limitation - HELD THAT - The appellant was not liable to the tax as has been proposed by the impugned show cause notice and has been confirmed by the impugned order. Hence the question of evasion of tax becomes redundant. Also no question arises with the appellant to have an intent to evade the same. Accordingly the extended period has wrongly been invoked. Conclusion - The cooperative societies are entitled to specific tax abatements under N/N. 30/2012-ST and that reimbursements do not constitute taxable service value. The extended period has wrongly been invoked. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment presented revolves around two core issues:

(i) Whether the appellant, a cooperative society, is entitled to the benefit of Notification No. 30/2012-ST dated 20.03.2012, which allows a reduced service tax liability.

(ii) Whether the demand for service tax on amounts received as reimbursements, such as salaries to guards, PF, and ESI, is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue No. 1: Entitlement to Notification No. 30/2012-ST

Relevant legal framework and precedents: The Notification No. 30/2012-ST provides certain exemptions and abatements for service tax liability, particularly for cooperative societies or associations of persons providing manpower recruitment services.

Court's interpretation and reasoning: The court examined whether the appellant qualifies as a cooperative society under the notification. The appellant's registration under the Rajasthan Co-operative Society Act, 2001, was crucial. The court noted that the appellant provided evidence of registration, and there was no contrary evidence from the department to dispute this status.

Key evidence and findings: The appellant produced a certificate of registration as a cooperative society. The department's argument centered on the appellant being a "Body of Individuals" rather than an "Association of Persons" as per their PAN card, but this was deemed irrelevant for the notification's purpose.

Application of law to facts: The court concluded that the appellant, being a cooperative society, was indeed eligible for the 75% abatement on service tax liability as per the notification. The comparison to an "Association of Persons" was unnecessary for this determination.

Treatment of competing arguments: The department's contention regarding the appellant's status based on the PAN card was dismissed as irrelevant for the notification's application. The appellant's argument, supported by legal precedents, was accepted.

Conclusions: The court held that the appellant was entitled to the benefits of Notification No. 30/2012-ST, and the demand for the remaining 75% of service tax was unsustainable.

Issue No. 2: Service Tax on Reimbursements

Relevant legal framework and precedents: The court referred to the Supreme Court's decision in the case of Intercontinental Consultants and Technocrats Pvt. Ltd., which clarified the non-taxability of reimbursements.

Court's interpretation and reasoning: The court found that the inclusion of reimbursements such as salaries, PF, and ESI in the gross taxable value was inconsistent with the Supreme Court's ruling.

Key evidence and findings: The appellant argued that these reimbursements were not part of the taxable service value. The court agreed, referencing the Supreme Court's decision.

Application of law to facts: The court applied the precedent to the appellant's case, finding that the demand for service tax on reimbursements was unjustified.

Treatment of competing arguments: The department's position was overruled based on established legal precedent.

Conclusions: The court set aside the demand for service tax on reimbursements, aligning with the Supreme Court's interpretation.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "In light of above observations with respect to Notification No. 30/2012, we hold that the appellant being a co-operative society was very much eligible for the abatement/exemption of 75% of the tax liability."

Core principles established: The judgment reinforces the principle that cooperative societies are entitled to specific tax abatements under Notification No. 30/2012-ST and that reimbursements do not constitute taxable service value.

Final determinations on each issue: The court concluded that the appellant was entitled to the benefits of the notification and that the demand for service tax on reimbursements was unsustainable. The appeal was allowed, and the order under challenge was set aside.