2018 (1) TMI 1087 - AT - Service Tax

Demand of service tax - Manpower Recruitment Supply provided to Group Companies - Held that - Since the appellant is not a professionally manpower supply agency and merely sharing the staff amongst the group companies and got the reimbursement of cost from such associate company, the same should not be considered as rendering of the taxable service for the purpose of levy of service tax. Further, there is no relationship between the appellant and its associated company as client and a service provider . Thus, in absence of providing of any service to the clients as contemplated in the definition of taxable service, the activities of the appellant will be outside the scope and purview of Service Tax under the category of manpower recruitment or supply agency service. CENVAT credit - demand for non-maintenance of separate records in terms of Rule 6 (3) ibid - Held that - own trading of securities cannot be termed as exempted service and accordingly, the provisions of rule 6 (3) ibid will not applicable for maintenance of separate records/accounts. The present finding is only on this limited aspect of application of Rule b (3). The basic issue as to whether the Cenvat Scheme itself is applicable to such trading has not been a dispute examined in the proceedings. Penalty on Cenvat Credit of Input Services reversed during adjudication - sub-rule (3) of Rule 15 ibid - Held that - since the dispute relates to the period 2005-06 to 2009-10, which is prior to the date of amendment of Rule 15 ibid, the rigour of said amended sub-rule will not have any application for imposition of penalty for irregular availment or utilisation of Cenvat Credit, by reason of fraud, collusion etc. - penalty cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax demand against manpower recruitment or supply agency service.
2. Disallowance of Cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004.
3. Imposition of penalty under sub-rule (3) of Rule 15 of the Cenvat Credit Rules.

Analysis:
1. The appeal challenged demands confirmed by the Commissioner for manpower recruitment supply and violation of Rule 6(3). The appellant argued that sharing staff and receiving reimbursement does not constitute a taxable service. They contended there was no client-service provider relationship with associated enterprises. The Tribunal analyzed the definition of "Manpower Recruitment or Supply Agency" and found the appellant did not provide such services to clients. Citing precedents, the Tribunal ruled in favor of the appellant, stating the activities fell outside taxable service scope.

2. Regarding disallowance of Cenvat credit, the appellant claimed own trading in securities did not fall under Rule 6(3). They highlighted the Department's acknowledgment that trading activities for sale do not attract Central Excise Duty or Service Tax. The Tribunal agreed, stating that own trading of securities did not constitute a taxable service, thus Rule 6(3) did not apply. The Tribunal noted the issue of Cenvat Scheme's applicability to trading was not disputed.

3. The penalty under Rule 15 was challenged as the amendment postdates the dispute period. The Tribunal ruled the amended sub-rule did not apply retroactively, thus the penalty for irregular Cenvat Credit utilization could not be upheld. Consequently, the penalty imposed in the impugned order was deemed unsustainable. The Tribunal allowed the appeal, setting aside the adjudged demands and penalties against the appellant.

This detailed analysis of the judgment addresses the issues raised in the appeal comprehensively, providing a thorough understanding of the Tribunal's decision and the legal arguments presented by the parties involved.