2018 (2) TMI 398 - AT - Service Tax

Valuation - includibility - Whether appellant is liable to pay Service Tax under the category of Manpower Recruitment or Supply Agency Service on the reimbursable expenses namely Wages, Bonus, ESI, Provident Fund, etc.? - Held that - the issue is settled in the case of Sangamitra Services Agency v. Commissioner of Central Excise 2007 (7) TMI 33 - CESTAT, CHENNAI , where it was held that such expenses are not includible in arriving at the taxable value - demand set aside. Scope of Manpower Recruitment or Supply Agency Service - Held that - The definition of Manpower Recruitment and Supply Services during the relevant period used the words commercial concern which was amended with effect from 1-5-2006. The disputed period is from 16-6-2005 to 30-9-2005 - The words commercial concern in the definition was substituted by the words any person only with effect from 1-5-2006. The period involved being prior to 1-5-2006 the appellant succeeds on this ground. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is liable to pay Service Tax under the category of 'Manpower Recruitment or Supply Agency Service' on reimbursable expenses like Wages, Bonus, ESI, Provident Fund, etc.

Analysis:

1. The appellant was providing Manpower services, which became taxable from 16-6-2005. The Department contended that the appellant was liable to pay Service Tax on reimbursable expenses like Wages, Bonus, etc., even though these were to be paid by the clients directly to the employees. The show cause notice confirmed the demand, interest, and penalties. The Commissioner (Appeals) upheld the decision, leading to this appeal.

2. The appellant's counsel referred to a Circular clarifying that such expenses are not part of taxable value and cited the judgment in 'Sangamitra Services Agency v. Commissioner of Central Excise - 2007 (8) S.T.R. 233 (Mad.)'. The argument was also based on the definition of 'Manpower Recruitment and Supply Services' during the relevant period, which used the term 'commercial concern'. Another judgment was cited to support this argument.

3. The respondent reiterated the findings in the impugned order. The Tribunal noted that the appellant was an individual, not a commercial concern, providing services during the period in question. The definition of the service in question used 'commercial concern' until 1-5-2006, which was after the period under consideration. Therefore, the appellant's argument had merit. The Tribunal also relied on the judgment in 'Sangamitra Services Agency' to establish that reimbursable expenses are not part of the taxable value. Consequently, the demand was deemed unsustainable, and the appeal was allowed with consequential reliefs.

4. In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellant based on the definition applicable during the relevant period and the precedent regarding reimbursable expenses. The appellant was not liable to pay Service Tax on such expenses, leading to the allowance of the appeal with any necessary reliefs.