2015 (12) TMI 547 - AT - Service Tax

Demand of service tax - services provided to group companies - Business Support Service, Management Consultancy Services and/or Manpower Recruitment Service & Supply Agency Service - Imposition of penalty - Held that - Appellant s employees are rendering various services to the group companies; appellant is also recovering some amount from the group companies and recording the same as receipts under salary and wages. It is to be noted that the show-cause notice in the case in hand seeks to demand the service tax liability under Business Support Service and Management Consultancy Services for the substantial amount and a small amount towards Manpower Recruitment Service & Supply Agency Service . We find that the services rendered by the employees of the appellant are in respect of running the business of the group companies efficiently. The top most level of the employees to the middle management and lower management levels of the employees are rendering the services which could be in support of the business of the group companies as also the advisory function in respect of various departments. In our view, the lower authorities, in this case has correctly classified the services rendered by the employees of the appellant under Business Support Service and Management Consultancy Services . We do not find any reason to interfere in such a reasoned order by the lower authorities. Accordingly, we hold that the services rendered in this case by the appellant employees are liable to service tax and the tax liability and the interest thereon as confirmed by the Adjudicating authority and upheld by the first appellate authority are correct and no interference is called for. - However, penalty is set aside - Decided partly in favour of assessee.

Summary

Issues:
- Discharge of service tax liability on amounts collected by the appellant
- Classification of services rendered by the employees
- Applicability of Business Support Service, Management Consultancy Services, and Manpower Recruitment Service & Supply Agency Service
- Disagreement on extended period for tax demand
- Imposition of penalties

Analysis:

Discharge of Service Tax Liability:
The appellant, associated with group companies, collected amounts for services rendered by employees but did not discharge the service tax liability. The audit classified services under Business Support Service, Management Consultancy Services, and Manpower Recruitment Service. Show-cause notice demanded tax liability, interest, and penalties. Adjudicating authorities confirmed demands, which the appellant contested on limitation and merits grounds. Both lower authorities upheld the demands.

Classification of Services Rendered:
The appellant argued that services rendered by employees did not fall under the mentioned categories. However, both lower authorities classified the services under Business Support Service and Management Consultancy Services. The employees provided support for group companies' business operations and advisory functions, justifying the tax liability.

Extended Period and Penalties:
The appellant claimed revenue neutrality and sought to set aside the demand for the extended period. The tribunal rejected this argument, upholding the demands for the material period. Regarding penalties, since the issue was interpretative, the tribunal set aside the penalties imposed on the appellant under section 80 of the Finance Act, 1994.

In conclusion, the tribunal upheld the service tax liability on amounts collected by the appellant for services rendered by employees, classifying the services under Business Support Service and Management Consultancy Services. The demands for tax liability and interest were confirmed, penalties were set aside, and the appeal was disposed of accordingly.