2021 (4) TMI 811 - AT - Service Tax

Levy of service tax - reimbursable expenses - appellant charge 10% of the actual wages to be paid to the workers so hired/supplied as their service charges and recover the same from service recipient - time limitation - HELD THAT - The appeal can be disposed of on point of limitation without going into the merit of the case. The appellant is registered with the service tax authority. They filed periodically ST-3 return in respect of service provided by them declaring the value as per their bona fide belief which is equal to commission which they received from the service recipient. With this disclosure the revenue is very much in the knowledge about the nature of service provided by the appellant therefore the revenue was not prevented to verify the correctness of the nature of service as well as the value declared by the appellant in their ST-3 return. In this undisputed fact it cannot be said that the appellant have suppressed the vital fact with intention to evade service tax. It is also found that the issue is purely of interpretation of valuation provision under Finance Act, 1994. In view of the judgment in COMMISSIONER OF C. EX., CUS. ST., DAMAN VERSUS NR. AGARWAL INDUSTRIES 2014 (5) TMI 603 - GUJARAT HIGH COURT it is settled that if on any issue there is a legal dispute which involved interpretation of law the mala-fide intention or suppression of fact with intent to evade payment of service tax cannot be attributed to the assessee - On this ground also the extended period of demand was not invokable. As per the facts in the present case the period of dispute i.e. 2005-06 to 2009-10 and show cause notice was issued on 19.05.2011. It is also observed that the appellant has filed their ST-3 return covering the period October 2009 to March 2009 on 27.04.2010. As per the facts the entire demand is beyond the normal period and falling under the extended period of limitation - entire demand is time barred - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether service tax is payable on the gross value including wages/salary paid to manpower supplied?
2. Whether the demand for service tax is time-barred?
3. Whether penalties under sections 76 and 78 can be imposed simultaneously?

Analysis:

Issue 1:
The case involved a dispute regarding the payment of service tax on the gross value, including wages/salary paid to the manpower supplied by the appellants. The appellants argued that the wages/salary were reimbursable expenses and not part of the service charges subject to service tax. They contended that their service provision ended upon engaging labor and that the wages earned by the laborers were not part of the consideration earned by the appellants. The appellant relied on legal precedents such as the Malabar Management Services case, upheld by the Supreme Court, to support their argument. The Tribunal considered these arguments and legal precedents to determine the interpretation of the law regarding the valuation of services under the Finance Act, 1994.

Issue 2:
Regarding the limitation period for the demand of service tax, the appellant argued that the demand was time-barred due to the absence of mala fide intention or suppression of facts. They highlighted that they had filed financial statements before government authorities, indicating no intent to evade taxes. The Tribunal examined the facts and legal principles related to the limitation period, citing judgments that emphasized the importance of legal disputes involving the interpretation of law in determining the invocability of the extended period of demand. Ultimately, the Tribunal found the entire demand to be time-barred based on the facts and supported by legal precedents.

Issue 3:
The question of imposing penalties under sections 76 and 78 simultaneously was also addressed in the case. The appellant argued against the imposition of both penalties, citing a judgment by the Gujarat High Court that penalties under both sections cannot be imposed concurrently. They emphasized that circulars from 2005, relied upon by the Revenue, contradicted legal decisions by higher courts. The Tribunal considered these arguments and upheld the appellant's position, setting aside the penalties imposed under both sections based on legal precedents and the interpretation of relevant laws.

In conclusion, the Tribunal set aside the impugned order on the ground of the demand being time-barred without delving into the merits of the case, ultimately allowing the appeal.