2016 (3) TMI 72 - AT - Service Tax

Demand of Service Tax on Management, Maintenance or Repair service for the period 01.07.2004 to 31.03.2005 - Appellant contended that he was a Proprietorship entity, was not therefore a commercial concern, which was the description in the provision for identification of a provider of the specified taxable service, of management, maintenance or repair service; and that there was no contract between the assessee and the recipient of the service i.e. OPM, Amlai and thus no liability to tax - Held that in view of the decision in CCE vs. R.S. Financial Services - 2007 (10) TMI 392 - CESTAT, NEW DELHI, a business run by a sole proprietor would nevertheless amount to business by proprietary concern; and the fact that the assessee was a proprietorship did not derogate from its liability to service tax. Analysing assessee s contention that he had provided no services under a contract, the impugned order concluded that there was a work order issued in favour of the assessee which amounts to a maintenance or repair service contract and therefore this contention, was misconceived. Therefore, the assessee/ appellant was a commercial concern and provided maintenance or repair service during the period in issue under a contract entered into with the recipient M/s OPM Amlai, suffers no infirmity. - Decided against the appellant

Summary

Issues:
- Failure to obtain registration, file returns, and remit service tax on maintenance or repair service.
- Liability of a proprietorship entity for service tax.
- Existence of a contract for maintenance or repair services.
- Taxability of manpower recruitment agency services.
- Reduction of tax liability and penalties.

Analysis:
1. The primary issue in this case revolves around the failure of the appellant to comply with registration, return filing, and service tax remittance obligations related to the rendition of maintenance or repair services during a specific period. A show cause notice was issued, demanding service tax along with interest and penalties under relevant sections of the Act. The appellant did not respond to the notice or attend the personal hearing, leading to the confirmation of the demand by the Assistant Commissioner.

2. Another crucial issue raised in the appeal was the liability of a proprietorship entity for service tax. The appellant contended that being a proprietorship entity, it was not a commercial concern as required for identification under the taxable service provision. However, the lower appellate authority, citing precedent, held that a business run by a sole proprietor amounts to a business by a proprietary concern, thereby upholding the liability of the appellant for service tax.

3. The existence of a contract for maintenance or repair services was also disputed by the appellant. The lower appellate authority found that a work order issued in favor of the appellant constituted a maintenance or repair service contract, rejecting the appellant's contention that no services were provided under a contract.

4. Additionally, the issue of taxability of manpower recruitment agency services provided by the appellant during the relevant period was addressed. The lower appellate authority recognized that a portion of the total consideration received was attributable to such services, which were not taxable during that period. Consequently, the liability for service tax was reduced after excluding the amount related to recruitment services.

5. Lastly, the judgment discussed the reduction of tax liability and penalties imposed on the appellant. The lower appellate authority reduced the quantum of penalty and dropped penalties under specific sections of the Act in line with the reduced service tax confirmed. The appellate tribunal, after careful consideration, upheld the findings of the lower authorities regarding the appellant being a commercial concern providing maintenance or repair services under a contract, leading to the rejection of the appeal without costs.