2018 (6) TMI 725 - AT - Service Tax

Project management services - The department was of the view that the appellant is liable to pay service tax on the basis of debit entry/book adjustments received from the associated enterprises - Held that - With effect from 10.5.2008, an amendment was brought out whereby the appellant has to discharge service tax on the basis of book adjustments in the case of associated enterprises - The decision in the case of KELLY SERVICES INDIA PVT. LTD. VERSUS C.C.E., & S.T., GURGAON-II 2015 (10) TMI 2228 - CESTAT NEW DELHI , have settled the position of law with the amendment brought forth with effect from 10.5.2008 as being prospective in nature. Thus, the demand for the period prior to 10.5.2008 cannot sustain and requires to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax based on book adjustments from associated enterprises prior to 10.5.2008.

Analysis:
The appellant, engaged in manpower recruitment and consulting engineer services, provided project management services to an associated enterprise from 2004 to 2008. The department contended that service tax was due based on debit entries/book adjustments from the associated enterprise. The original authority upheld the demand, leading to the appeal.

The appellant's counsel argued that a 2008 amendment mandated service tax payment through book adjustments for associated enterprises, but it was prospective. Citing precedents like Sify Technologies Ltd. and Kelly Services India P. Ltd., the counsel contended that demands pre-dating the amendment lacked legal basis.

The department's representative reiterated the original findings. After considering both arguments, the Tribunal referred to the settled legal position post the 2008 amendment. The Tribunal held that demands for the period before 10.5.2008, when the amendment came into effect, were unsustainable. Consequently, the appeal was allowed, and any consequential relief was granted.

This judgment clarifies the retrospective application of the 2008 amendment regarding service tax liability based on book adjustments from associated enterprises. It underscores the importance of legal precedents in interpreting tax laws and ensuring compliance with the correct legal framework.