2017 (11) TMI 350 - AT - Service Tax

Manpower Recruitment and Supply Agency Service - whether the employees of the appellant deputed to the their other group companies against which they received consideration towards remuneration of those employees during 2006-07 to 2009-10 falls under category Manpower Recruitment and Supply Agency service as defined under sub clause (k) of Section 65(105) of the Finance Act, 1994 and liable for Service Tax? - Held that - from shareholding pattern it is seen that some companies share holding is less than 50%, therefore it cannot be said that these are subsidiaries of the appellant - Similarly in other subsidiary companies it has to be ascertained, whether in of case different limited company, whether there is relationship of service provider and service recipient. Since the adjudicating authority has not gone into details of constitution of the each company and share holding pattern, matter needs to be remanded to the adjudicating authority - appeal allowed by way of remand.

Summary

Issues involved:
1. Whether the employees deputed to other group companies by the appellant fall under the category of Manpower Recruitment and Supply Agency service and are liable for Service Tax.

Analysis:
The judgment is an appeal against an Order-in-Original confirming a demand of Service Tax, interest, and penalty. The main issue is whether the employees deputed to other group companies by the appellant are liable for Service Tax under the category of Manpower Recruitment and Supply Agency service. The appellant relied on a previous tribunal judgment and High Court decision stating that deputing manpower to group companies does not constitute a provision of service. The appellant submitted the shareholding pattern of all group companies, which was taken on record. The Revenue, however, reiterated the findings of the impugned order.

The tribunal noted that in the previous case relied upon by the appellant, the demand was set aside based on the deputation of manpower to group companies. However, in the present case, the adjudicating authority did not consider the constitution of the group companies to determine the relationship between the appellant and the group companies. The tribunal emphasized that the mere term "Group Company" is insufficient to establish the nature of the relationship. Upon reviewing the shareholding pattern submitted by the appellant, it was observed that in some companies, the shareholding was less than 50%, indicating they may not be subsidiaries of the appellant. The tribunal concluded that a detailed examination of the constitution of each company and the shareholding pattern is necessary to ascertain the relationship between the service provider and recipient. Therefore, the matter was remanded to the adjudicating authority for a fresh adjudication order based on a thorough examination of the facts and legal aspects as per the tribunal's observations.

In conclusion, the appeal was allowed by way of remand to the adjudicating authority for a denovo adjudication order after a detailed examination of the constitution of each company and the shareholding pattern to determine the relationship between the appellant and the group companies concerning the liability for Service Tax under the Manpower Recruitment and Supply Agency service category.