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2024 (7) TMI 312 - AT - Service TaxClassification of services - Manpower Recruitment or Supply Agency Service or Business Auxiliary Service? - deputation of employees to other companies on monthly payment basis - services provided by an overseas service provider in terms of the Selling Agreement and Master Agreement - Business Auxiliary Service or not - extended period of limitation. Extended period of limitation - HELD THAT - The appellant was very well aware that the two projects Fixed Price Project and Time Materials Projects are two different projects under different parameters while one being on the information technology service rendered and other being purely on personnel which has already been discussed above. The department came to know of these details only after DGCEI investigated and got to know about these Agreements and the payment terms. Therefore, the invocation of extended period has been rightly invoked in view of the fact that certain agreements and invoices were not brought to the knowledge of the department - the demand for Rs. 1,12,86,898/- on man power services for the period June 2005 to March 2007 is confirmed along with appropriate interest. The equal amount of penalty under Section 78 of the Finance Act is also upheld. All other penalties are set aside. Business auxiliary service or not - services provided by an overseas service provider in terms of the Selling Agreement and Master Agreement - HELD THAT - As per the Master Agreement the company is engaged in the business of providing software and technology relating services to entities within and outside India. And with regard to payments, it is stated that the company shall pay fees for services provided by the service provider based on the actual cost incurred by the service provider in providing the services plus service fee. As per the Selling Agreement placed on record, the company is engaged in the business of providing software and technology related services to entities within and outside India. As per the payment terms, it is stated that for the selling services the company shall pay the agent the actual cost/expenses incurred by the agent in providing he services plus a service commission/fee which shall be computed at 10% of the aggregate actual cost/expenses incurred by the agent, in providing the services - the demand for the period 1.04.2001 to 17.04.2006 cannot be sustained. The appellant has not denied that the services have been received from their overseas company but only submits that for the period prior to 17.04.2006 they are not liable to pay duty - since the demand from 18.04.2006 to March 2007 is within the normal period, the same is remanded to the Commissioner to redetermine the tax liability after taking into consideration the submissions of the appellant that the Business Auxiliary Service excludes information technology service. The demand amounting to Rs.1,12,86,898/- for Manpower Recruitment and Supply Agency Service along with equal amount of penalty under Section 78 of the Finance Act is confirmed - demand on Business Auxiliary Service for the period July 2003 to 17.04.2006 is set aside along with interest and all other penalties. For the period 18.04.2006 to March 2007 the matter is remanded to the Commissioner only for redetermination of service tax on Business Auxiliary after affording the appellant a reasonable opportunity of being heard. Appeal disposed off by way of remand.
Issues Involved:
1. Classification of services provided by the appellant under 'Manpower Recruitment or Supply Agency Service'. 2. Classification of services under 'Business Auxiliary Service'. 3. Applicability of service tax under Reverse Charge Mechanism (RCM). 4. Invocation of extended period of limitation. 5. Imposition of penalties. Detailed Analysis: 1. Classification of Services under 'Manpower Recruitment or Supply Agency Service': The appellant, engaged in software product engineering services, was found to be deputing employees to other companies on a monthly payment basis, classified as 'Manpower Recruitment or Supply Agency Service' under Section 65 of the Finance Act, 1994. The appellant argued that their services were information technology services, not manpower supply. The Master Services Agreement (MSA) with M/s. Philips Electronics India Limited distinguished between 'Fixed Price Projects' and 'Time and Materials Projects'. The 'Fixed Price Projects' were controlled by the appellant with specified deliverables, while 'Time and Materials Projects' involved supplying personnel under the client's control without specified deliverables. The tribunal concluded that 'Time and Materials Projects' constituted manpower supply services, confirming the demand of Rs. 1,12,86,898/- along with interest and equal penalty. 2. Classification of Services under 'Business Auxiliary Service': The appellant received services from an overseas service provider under a 'Selling Agreement' and 'Master Agreement', classified as 'Business Auxiliary Service' (BAS) under Section 65 of the Finance Act, 1994. The appellant contended that services received before 18.04.2006 were not taxable under BAS as per the Bombay High Court's decision in Indian National Shipowners Association v. UOI, which was upheld by the Supreme Court. The tribunal accepted this argument, setting aside the demand for the period 01.04.2001 to 17.04.2006. For the period 18.04.2006 to March 2007, the tribunal remanded the matter to the Commissioner to re-determine the tax liability, considering the appellant's claim that BAS excludes information technology services. 3. Applicability of Service Tax under Reverse Charge Mechanism (RCM): The tribunal referred to the statutory provisions and judicial precedents, confirming that service tax liability on services provided by a non-resident to a recipient in India arises only from 18.04.2006, the date of enactment of Section 66A of the Finance Act, 1994. The demand for the period before this date was set aside. 4. Invocation of Extended Period of Limitation: The tribunal upheld the invocation of the extended period of limitation, noting that the appellant was aware of the nature of their activities but did not disclose relevant agreements and invoices to the department. The demand for Rs. 1,12,86,898/- on manpower services for the period June 2005 to March 2007 was confirmed. 5. Imposition of Penalties: The tribunal upheld the equal amount of penalty under Section 78 of the Finance Act for manpower supply services. All other penalties were set aside. The tribunal remanded the matter regarding the demand for BAS for the period 18.04.2006 to March 2007 to the Commissioner for re-determination after considering the appellant's submissions. Conclusion: The appeal was disposed of with the confirmation of the demand and penalty for manpower supply services, setting aside the demand for BAS for the period before 18.04.2006, and remanding the matter for the period 18.04.2006 to March 2007 for re-determination of tax liability under BAS.
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