2012 (6) TMI 524 - AT - Service Tax

Waiver of pre-deposit Manpower Supply service - receipt of manpower supply from the holding company - M/s. Bain & Company , USA Held that - in case of supply of manpower by an agency, the persons supplied are the employees of the supply agency who receive their salaries/wages and other allowances from such agency and not from the clients - Persons loaned by the holding company to the appellants were receiving their salaries and allowances from the appellants in foreign exchange and only their P.F. Contribution in foreign exchange was being remitted to the holding company as they were earlier working for the holding company - Persons, who are alleged to have been supplied by the holding company to the appellant can not be said to be the employees of the holding company - No services of manpower recruitment or supply agency has been received by the appellant from their holding company. Stay application is allowed.

Summary

Issues:
1. Alleged service tax liability on manpower supply and business auxiliary services.
2. Alleged wrongful Cenvat credit availed.
3. Show cause notice for recovery of short paid service tax, interest, and penalties.
4. Adjudication by Commissioner confirming demands and penalties.
5. Appeal against the Commissioner's order and stay application.

Analysis:
1. The appellants, a subsidiary of a US-based company, were alleged to have availed taxable services of manpower supply and business auxiliary services from their holding company. The Department claimed service tax on the amounts paid for these services. A show cause notice was issued for recovery of the alleged short paid service tax, interest, penalties, and wrongful Cenvat credit availed during the period in question.

2. The Commissioner, in the Order-in-Original, confirmed the service tax demands, Cenvat credit demand, and imposed penalties under relevant sections of the Finance Act, 1994. The appellants filed an appeal against this order along with a stay application.

3. The appellant argued that no manpower supply service was received from the holding company as the deputed staff were working as their employees, and salaries were paid directly by the appellant. The appellant contended that no consideration for manpower supply was paid to the holding company, making the service tax demand unsustainable. The appellant requested waiver of pre-deposit for hearing the appeal.

4. The Department opposed the waiver, asserting that the appellant did receive manpower supply services as defined under the Finance Act, 1994. The Department emphasized that the deputed staff were employees of the holding company, and payments were made in foreign exchange.

5. The Tribunal analyzed the submissions and relevant legal provisions. It noted that for a supply of manpower service, the supplied persons must be employees of the supply agency. In this case, the deputed staff were paid by the appellant, indicating they were not employees of the holding company. The Tribunal found the service tax demand unsustainable and waived the pre-deposit requirement for the appeal, allowing the stay application.

This detailed analysis covers the issues of alleged service tax liability, wrongful Cenvat credit availed, the show cause notice, adjudication by the Commissioner, and the subsequent appeal with the stay application, providing a comprehensive overview of the legal judgment.