2015 (8) TMI 1138 - AT - Service Tax

Demand of service tax - Manpower Recruitment or Supply Agency service - placement charges are collected from students and not from an employer or a prospective employer - Held that - From the definition and the enumeration of this activity as a taxable service, it is clear that what is taxable is the rendition of any service towards recruitment or supply or manpower, temporarily or otherwise to a client. The recipient of this service is a client who receives services in the nature of recruitment of supply of manpower, temporarily or otherwise. The recipient client must thus be an employer or prospective employer and the consideration for this service must flow from such employer to the provider of the service.The placement facilitation provided by educational institutions whereunder the placement charges are collected from students and not from an employer or a prospective employer, do not on a fair and reasonable interpretation of the taxable service as defined in the Act, fall outside the purview of either the definitional or enumerative provision of the Act. - The concurrent conclusions to the contrary recorded by the primary or lower appellate authorities are fundamentally misconceived, invite invalidation and are accordingly quashed. - Decided in favour of assessee.

Issues:
1. Whether an educational institution providing placement services to students falls under the definition of a manpower recruitment or supply agency service for the purpose of service tax.
2. Whether students can be considered as clients in the context of manpower recruitment or supply agency service.
3. Interpretation of Section 65(68) and Section 65(105)(k) of the Act in relation to the taxable service provided by a manpower recruitment or supply agency.

Analysis:
1. The appellant, an educational institution offering engineering and technology courses, was issued a show cause notice for allegedly not paying service tax on charges received for facilitating student placements. The primary authority held that educational institutions like IITs and IIMs fall within the definition of a manpower recruitment or supply agency, making services related to campus recruitment taxable under this category. The appellant contested this, arguing that its services to students do not qualify as manpower recruitment or supply agency services. However, the Deputy Commissioner upheld the tax liability, stating that the definition covers services from selecting manpower to employment, considering the student as a client for service tax purposes.

2. The appellant's appeal was rejected by the Commissioner (Appeals) who noted that the appellant charged students for campus placements, making the students clients in a principal-to-principal relationship. The Commissioner disagreed with the appellant's argument that only employers could be termed as clients in the context of manpower recruitment services. The Commissioner emphasized that students paying for placement services derived benefits from enhanced employment prospects, establishing them as clients under the service tax framework.

3. Section 65(68) defines the taxable service as providing manpower recruitment or supply agency services to a client, where the recipient must be an employer or prospective employer. The judgment clarified that the consideration for this service must flow from the employer to the service provider. In this case, as the educational institution collected placement charges from students and not employers, the service did not align with the taxable service definition. The judgment invalidated the lower authorities' conclusions, stating that the placement facilitation by educational institutions, where charges come from students and not employers, falls outside the purview of the defined taxable service. The appeal was allowed, with no costs awarded.

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