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TMI Blog2013 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to ship management service. Therefore, the classification sought in the present case by the Revenue under “manpower recruitment or supply agency” service cannot be faulted at all. Whether the respondent was acting as a Pure Agent of M/s. TIPL? - Held that: - When one reads the Agreement entered into by the respondent with M/s. TIPL, it is seen that none of the four elements described above are present. The agreement is not one between an agent and a principal; it is one between two principals. Secondly, the respondent is engaging the seafarers, responsible for their conduct, payment of wages/salaries/other compensations, for their termination and repatriation. For such services rendered, the respondent is getting compensated in two ways, one by way of re-imbursement of the wages/salaries of the seafarers and second by way of daily compensation based on the number/type of seafarers supplied. Thus the question of treating the respondent as a ‘pure agent’ of M/s. TIPL does not arise at all from the terms and conditions of the agreement. Whether both the amounts received, that is, reimbursement of wages and daily compensation are leviable to Service Tax? - Held that: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )]. - The appeal filed by Revenue is directed against Order-in-Original No. 05/ST/WLH/2012, dated 23-1-2012 passed by the Commissioner of Service Tax, Mumbai II. A cross objection has been filed by the Respondent M/s. Jubilant Enpro Private Ltd., Powai, Mumbai, (Jubilant in short) against the appeal. 2. A show cause notice was issued to the respondent Jubilant vide notice dated 20-5-09 alleging short-payment of service tax in respect of manpower recruitment or supply agency service rendered by them to M/s. Tidewater India (Pvt.) Ltd. (TIPL in short). It was noticed that Jubilant were discharging service tax only on the compensation received for the provision of the service but failed to discharge service tax on reimbursement of wages received by them (by way of debit notes) from their client M/s. Tidewater during the period November 05 to December 08. The total reimbursement received towards the wages was Rs. l4,45,89,055/- and the service tax liability on the same worked out to ₹ 1,75,22,141/-. It was alleged that M/s. Jubilant did not disclose the above receipts to the department and in fact suppressed the value of services with a mala fide intention to evade payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified rates. The contract of service was entered into between the seafarer and the respondent which also shows the seafarer was engaged by the respondent. The Respondent issued two debit notes, one for the compensation received wherein they levied service tax at the applicable rates and the other for the reimbursement of crew wages where no service tax was levied. (b) As per C.B.E. C s circular No. B1/6/2005-TRU, dated 27-7-2005, service tax has to be charged on the full amount of consideration received for the supply of manpower and the value includes recovery of staff costs from the recipient, e.g. salary and other contributions. Even if these amounts are paid directly to the workers by the service recipient, these amounts are still part of the consideration and hence forms part of the gross amount charged. (c) Reliance is also placed on the following decisions,- (i) Panther Detective Services - 2006 (4) S.T.R. 116 (Tri.-Del.); (ii) Punjab Ex-servicemen Corpn. - 2009 (13) S.T.R. 529 (Tri.-Del.); (iii) -do- 2012 (25) S.T.R. 122 (P H); (iv) Sri Bhagavathy Traders - 2011 (24) S.T.R. 290 (Tri.-LB); (v) Safe Sure Marine Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent is only to the extent of recruitment: of qualified personnel as desired by TIPL and therefore, the respondent cannot be said to have rendered manpower supply service . (c) Service tax is payable on the consideration charged by the respondent from TIPL for providing the taxable service and cannot in any way leviable on the wages of the manpower reimbursed by TIPL which were paid by the respondent on behalf of TIPL as is evident from the Form 16 issued under the Income-tax Act, 1961 for the deduction of TDS issued to the employees. (d) The respondent is acting as a pure agent of TIPL within the meaning of Rule 5(2) of the Valuation Rules. While making payment of wages to the seafarers on behalf of TIPL, the respondent was acting as pure agent as clarified in Board s circular B1/4/2006-TRU, dated 19-4-2006. (e) The issue involves interpretation of law and there is no wilful suppression of facts by the respondent and therefore, extended period of time could not have been invoked against the respondent for confirmation of service tax demand. They have declared the amounts received as pure agent in the respective ST3 returns filed with the department. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r shall hold valid certifications as required by the Territory and shall be fully qualified and experienced to work in the OWNER S SSVs. OWNER may request additional SEAFARER(s) or modify or reduce the number and category of CONTRACTOR S SEAFARER upon giving CONTRACTOR reasonable notice thereof. (2) To provide the OWNER the detailed information about the qualified SEAFARER(s) prior to joining the SSV(s), including but not limited to, name, grade of licence, and record of sea service with passport photographs. (3) To arrange for the physical and medical examinations (including, but not limited to, drug and alcohol screening) of the SEAFARER(s) by OWNER S doctor prior to each SEAFARER working on OWNER S SSVs. (4) Subject to OWNER S prior written approval, and as required by law of the territory or industry practice, CONTRACTOR shall develop an Employment Agreement to be signed by and between CONTRACTOR AND SEAFARER(S). (5) To execute the Employment Agreement by and between the CONTRACTOR and SEAFARER(S) who have been selected and declared physically and medically fit by OWNER S doctor. (6) To make, sign, seal and execute the Employment Agreements and related documents, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The number of SEAFARER(S) required in each category; (b) The desired qualification and skill required for each category of the SEAFARER; (c) Names and locations of SSVs for which the SEAFARER(S) are required; (d) The work schedule required of the SEAFARER. Provided however, that the foregoing requirements are in accordance with the relevant labour laws and regulations, the OWNER shall furnish CONTRACTOR from time to time with a scale of wages applicable to the SEAFARER. The owner reserves the right to revise such scale at any time on a prospective basis. OWNER shall reimburse the CONTRACTOR, the applicable wages of each SEAFARER incurred as an expense to the CONTRACTOR. (2) In addition to the above mentioned wages for each SEAFARER, the OWNER shall pay compensation enumerated in Exhibit A to the CONTRACTOR for the services rendered by the CONTRACTOR under this Agreement. . ARTICLE V - INSURANCE (1) CONTRACTOR shall at its cost, secure and maintain during the terms of this contract, workmen s compensation, mediclaim and Personal Accident Insurance Cover required by law to be carried on CONTRACTOR S SEAFARER per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowances, compensatory benefits, leave wages and social benefits. 6. Necessary deductions including but not limited income-tax will be made from the gross wages paid to the Seafarer by the company 7. During the Service tenure on board, the Seafarer will be provided Insurance cover under the Workmen Compensation, Medical and Personal Accident by Policies by the Company .. . ... 10. The service conditions and more particularly pertaining to working hours, pay procedures, medical fitness, insurance coverage, adherence to Owner s Safety Management System, Seafarer s familiarization ashore, conduct onboard and termination are covered in the Fleet Manning Manual of the Company, which the Seafarer shall read and understand before joining the vessel. Signing this agreement by the Seafarer confirms his agreement to abide by all the terms and conditions detailed in the Fleet Manning Manual of the Company and this Contract of Service. Signature of the Seafarer Authorised signatory for Jubilant Enpro Pvt. Ltd. 5.2 From the language and teno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manpower supply have no basis whatsoever. The express language of the Agreement and the terms and conditions stipulated therein do not support such a proposition at all and in fact controverts such a view. Therefore these contentions have to be rejected outright and we hold accordingly. 5.4 The next question is whether the service rendered by the respondent is taxable under manpower recruitment or supply agency service or ship management service . The definitions are as follows : 65(68) manpower recruitment or supply agency means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person. 65(96a) ship management service includes,- (i) the supervision of the maintenance, survey and repair of ship; (ii) engagement or providing of crews; (iii) receiving hire or freight charges on behalf of the owner; (iv) arrangements for loading or unloading; (v) providing for victualling or storing of ship; (vi) negotiating contracts for bunker fuel and lubricating oil; (vii) payment, on behalf of the owner, of expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service was classifiable under Management Consultant Service as contended by Revenue or under Ship Management Service as claimed by the appellant therein. In the said decision, it was held that since ship management service was more specific, the service was classifiable under the said category and not under management consultant service . Thus the issues involved were complete different and distinguishable. In the Ashok Agarwal case, the issue related to classification under storage and warehousing service or clearing and forwarding agency service . Since the demand was confirmed under a category not proposed in the show cause notice, the same was set aside. We do not know how this decision has any bearing to the facts of the present case. Similarly in the Mandovi Motors Pvt. Ltd. case, the issue related to classification under Authorised Service Centre or Business Auxiliary Service . Since the demand was confirmed under the latter category whereas the proposal in the show cause notice was for classification in the former category, the Tribunal held that the appellate authority travelled beyond the show cause notice and set aside the order. In the Mahakoshal Bever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a consideration of money, be the gross amount charged by the service provider for such service provided or to be provided by him. The Respondent charges for the services rendered by way of two debit notes, one debit note for the daily compensation and the other for the wages of the seafarers. Merely because he has split up the gross amount charged into two elements, it does not mean that only one of them is the gross amount charged and the other is not. The modus operandi adopted in splitting up the gross amount appears to be only for the purpose of avoiding/evading service tax and nothing else. Therefore, the total/gross amount charged for the service rendered is the sum total of both the debit notes, as per the provisions of Section 67 and we hold accordingly. 5.8 The respondent has relied on the Intercontinental Consultants and Technocrats Pvt. Ltd. case decided by the Hon ble High Court of Delhi wherein the High Court has held that Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 is ultra vires of Sections 66 and 67 of the Finance Act, 1994, on the ground that the quantification of value of the service can never exceed or go beyond the gross amount cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent s claim is that they have indicated in the ST3 returns, the amounts received towards seafarer s wages as Amount received as pure agent under column F(1)(c)(iii) and copies of the same has been annexed to the cross objection papers. From these returns for the period October, 2006 to March, 2009, it is seen that the Respondent has claimed that certain amounts received under the category of pure agents is exempt from service tax. Though the appellant has not stated in the said returns that these receipts are towards reimbursement of wages, no misdeclaration with an intent to evade payment of service tax can be alleged against the appellant. If there was any intent to evade service tax, they need not have shown the amounts received under the category of pure agents. Therefore, the extended period of time cannot be invoked to confirm the service tax demand. In view of the above factual position apparent from the records, we hold that the demand for service tax is sustainable only for the normal period of time under Section 73 of the Finance Act, 1994. Once the demand for service tax is upheld, interest liability is automatic and consequential under the provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceed the service tax payable. No mens rea is required for imposition of penalty under Section 76 and mere failure to pay Service Tax along with interest will attract the provisions. The rate of penalty is also specified therein and there is no discretion on the penalty amount, which is only subject to the maximum amount/cap equal to the service tax payable. 5.14 The Hon ble High Court of Kerala in the case of Asst. Commissioner of Central Excise v. Krishna Poduval [(2006 (1) S.T.R. 185 (Ker) had occasion to consider the scope of Sections 76 and 78 of the Finance Act, 1994 and held as follows :- The penalty imposable under Section 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of Section 68 and the Rules made thereunder, whereas Section 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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