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2021 (2) TMI 1093 - AT - Service TaxClassification of services - Manpower Recruitment or Supply Agency Service or not - period 16.6.2005 to 2007 08 - Department was of the view that for the period prior to 2008, as per the agreements entered by the appellant with various clients, the appellants have rendered MRSA services to the clients - appellant claims that the services are nothing but Information Technology Software Services for which they have been paying service tax after 2008 and that these activities will not fall under the definition of MRSA - suppression of facts or not - extended period of limitation - HELD THAT - it can be seen that the control and supervision of the staff / qualified personnel supplied to the premises of the client (ABN AMRO Bank) is with the appellant (contractor) only. Though certain personnel are supplied to the premises of the client for carrying out work / job of the client, it cannot be said that the activity would fall under MRSA. The discussion in para 12.3 of the order in original indicates that mere supply staff / qualified personnel to premises of client is construed as MRSA by the lower authority which is erroneous. Even if parties agree that consideration will be based on the number of persons employed, what has to be looked into is whether the agreement is to execute the work for the client or merely supply the work force. What has to be examined is the core activity for which the agreement is entered between parties. The clients are not in IT related fields. They need services in the nature of annual maintenance of systems, testing, developing of software etc. The disputed transactions as per agreement do not reflect ingredients required for MRSA. There is no iota of evidence to show that the appellants were rendering MRSA service during the disputed period. On merits, the issue is settled by the decision in the case of Cognizant Tech Solutions 2010 (3) TMI 328 - CESTAT, CHENNAI where it was held that The assistance in recruitment and imparting of specialized training for the recruited personnel cannot be held against the appellants claim that they have not supplied the manpower but have merely recruited and retained the same for providing specialized services to Pfizer utilizing such manpower - The demand under MRSA cannot sustain and requires to be set aside. The Hon ble High Court has remanded the matter to reconsider the issue on limitation also. The entire demand is raised invoking the extended period. In Coromandel Infotech India Ltd. 2019 (1) TMI 323 - CESTAT CHENNAI , the Tribunal had occasion to consider the issue of limitation when there were two conflicting views on the very same issue. Moreover, in the case before us, apart from bald allegation that the appellant has suppressed facts with intention to evade payment of service tax, there is no positive act brought out before us to establish the allegation of suppression. It is evident that the appellant was all along responding and cooperating with the department. The show cause notice is issued only on 23.4.2010. There are no evidence to support the allegation that the appellant has suppressed facts with intention to evade payment of service - the appellant succeeds on limitation also. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Demand of service tax on Manpower Recruitment or Supply Agency Service (MRSA) for the period 16.6.2005 to 2007-08. 2. Application of extended limitation period for the demand. Issue-wise Detailed Analysis: 1. Demand of service tax on MRSA: The appellant, engaged in providing IT-related solutions, was alleged by the department to have rendered MRSA services prior to 2008, which the appellant contested, stating these were IT Software Services, taxable only after 2008. The Tribunal analyzed various client agreements to determine if the services fell under MRSA or IT Software Services. - ABN AMRO Bank: The agreement involved software application development and support, with control and supervision retained by the appellant. Therefore, it did not fall under MRSA. - Central Bank of India: The scope was maintenance work, with control over personnel by the appellant, hence not MRSA. - Citigroup Information Technology Operations and Solutions (CTIOS): The agreement was for software services like application development and testing, not MRSA. - GE Money (GE Capital Corporation): The appellant was responsible for software services, retaining control over personnel, thus not MRSA. - HDFC Bank: The agreement was for software maintenance services, with control over personnel by the appellant, not MRSA. - Punjab National Bank: The scope included annual maintenance and software-related works, not MRSA. - SAK Consumer Retail Services Ltd.: The work order was for an automated application, not MRSA. - Scope International Pvt. Ltd.: The appellant provided software-related services, retaining control over personnel, not MRSA. - Societe Generale Global Solution Centre Pvt. Ltd.: The services involved creating and developing software, not MRSA. - Acsys Software India Pvt. Ltd.: The scope was IT-related services, not MRSA. - Bajaj Allianz: The agreement was for Java developer application support, an IT-related service, not MRSA. - ING Vysya Bank Ltd.: The scope included various IT-related services, not MRSA. The Tribunal concluded that the agreements indicated the appellant was providing IT Software Services, not MRSA, and thus the demand for service tax under MRSA was not sustainable. 2. Application of extended limitation period: The entire demand was raised invoking the extended period of limitation, alleging suppression of facts by the appellant. The Tribunal found no evidence of suppression or intent to evade tax. The appellant had been responsive and cooperative with the department's inquiries, providing necessary documents and explanations. The Tribunal referenced the Supreme Court's decision in Continental Foundation Jt. Venture, which emphasized that misstatement or suppression must be willful to justify the extended period. The Tribunal held that the extended period was not applicable due to the interpretational nature of the issue and lack of evidence of willful suppression. Conclusion: The Tribunal found in favor of the appellant on both the merits and the limitation issue, setting aside the demand under MRSA and ruling that the extended period of limitation was not invocable. The decision was pronounced in open court on 24.02.2021.
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