Tribunal grants waiver for service tax demand, interest, and penalty in manpower recruitment agency case.

The Tribunal granted the waiver of pre-deposit of the service tax demand, interest, and penalty for a man-power recruitment or supply agency services case. It found that the applicants were not operating as a manpower recruitment or supply agency but were managing hotels and sending employees to other hotels under subsidiaries/associate companies. The Tribunal held that the applicants had a strong case for waiver, staying the recovery during the appeal process, providing relief to the applicants.

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Issues:
Waiver of service tax, interest, and penalty for man-power recruitment or supply agency services.

Analysis:
The applicants sought waiver of service tax, interest, and penalty amounting to Rs.1,01,25,811 for providing man-power recruitment or supply agency services from April 2007 to September 2008. The applicants, who own various hotels in India, contended that when their manager/employees were sent on deputation to hotels managed by subsidiaries/associate companies, the expenses were reimbursed, and no service was provided. They argued that since the subsidiaries/associate companies reimbursed actual expenses and the applicants recovered salary and other costs on an actual basis, they were not providers of taxable service.

The Revenue, on the other hand, argued that the applicants supplied man-power to other units on a cost recovery basis, with the employees remaining on the applicants' payroll and being sent on deputation to hotels of subsidiaries/associate companies. The Revenue contended that as the applicants were supplying man-power to hotels run by subsidiaries/associate companies, they fell under the definition of 'man-power recruitment or supply agency service,' justifying the demand.

The Tribunal examined the provisions of Section 65(68) of the Finance Act, 1994, defining 'manpower recruitment or supply agency' and 'taxable service' in relation to the recruitment or supply of manpower. It noted that the applicants deputed their manager/employees to hotels managed by subsidiaries/associate companies, recovering costs on an actual basis without retaining any amount. The Tribunal found that the applicants were not operating as a manpower recruitment or supply agency but were managing hotels and sending employees to other hotels under subsidiaries/associate companies. Consequently, the Tribunal held that the applicants had a strong case for waiver of the service tax demand, staying the recovery during the appeal process.

In conclusion, the Tribunal granted the waiver of pre-deposit of the service tax demand, interest, and penalty, as it found that the applicants were not engaged in supplying manpower as an agency but were managing hotels and deputing employees to other units. The stay petition was allowed, providing relief to the applicants during the pendency of the appeal.

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