2014 (10) TMI 607 - AT - Service Tax

Waiver of pre deposit - Manpower recruitment and supply agency s service - penalties under Section 77 & 78 - Held that - Issue involved requires consideration of the contract, decisions relating to reimbursement of expenses of various High Courts and Tribunals, definition of manpower supply service as applicable to the facts of this case, facts as to whether extended period could have been invoked, etc. which can be done at the time of final hearing. At this stage, we consider that the amount already deposited by the appellant is sufficient for the purpose of hearing the appeal. Accordingly, there shall be waiver of pre-deposit and stay against recovery of the balance dues for 180 days from the date of this order - stay granted.

Summary

Issues: Liability to pay service tax on commission received from the State Government for providing 'manpower recruitment and supply agency's service'; applicability of waiver of pre-deposit and stay against recovery of balance dues.

Analysis:

1. Liability to pay service tax: The appellants were engaged in providing 'manpower recruitment and supply agency's service' by providing teachers for schools as per the requirement of the Karnataka State Government. The issue revolved around whether the appellants were liable to pay service tax on the commission received from the State Government. The appellants argued that they believed in good faith that they were not liable to pay service tax on the commission received. They contended that since the service was provided to the State Government and the salary of teachers/principals was fixed by the State Government, and the appellants were getting only 10%, they should be treated as agents of the State Government and hence not liable to pay service tax.

2. Contractual obligations and legal considerations: The judgment highlighted the need to consider the terms of the contract, decisions of various High Courts and Tribunals regarding the reimbursement of expenses, and the definition of 'manpower supply service' applicable to the case. The Tribunal emphasized the importance of examining whether the extended period for tax assessment could have been properly invoked in this case. These factors were deemed essential for a comprehensive evaluation of the issue during the final hearing.

3. Waiver of pre-deposit and stay against recovery: The Tribunal, in its order, acknowledged that the amount already deposited by the appellant during the investigation was deemed sufficient for the purpose of hearing the appeal. Consequently, the Tribunal granted a waiver of pre-deposit and imposed a stay against the recovery of the balance dues for 180 days from the date of the order. This decision aimed to provide the appellant with a fair opportunity to present their case without the immediate financial burden of the outstanding tax liabilities.

In conclusion, the judgment delved into the intricacies of the contractual arrangement, legal interpretations, and the application of tax laws concerning the liability of the appellants to pay service tax on the commission received for providing 'manpower recruitment and supply agency's service'. The Tribunal's decision to grant a waiver of pre-deposit and stay against recovery of balance dues reflected a balanced approach to ensure a just and equitable resolution of the matter.