Provident fund contribution included in taxable value where it formed part of the service consideration for manpower supply

Provident fund contribution received from the service recipient was treated as part of the gross amount charged for manpower recruitment or supply agency service and included in the taxable value under the service tax law. Section 67 of the Finance Act, 1994 valued the service on the money received for the arrangement, and the fact that the amount related to the provider's statutory employee obligations did not exclude it from consideration. On these facts, the contribution formed part of the service consideration, so the tax demand and penalties were sustained.

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Issues: Whether the provident fund contribution received by the assessee from the service recipient formed part of the gross amount charged for manpower recruitment or supply agency service and was includible in the taxable value under the service tax law.

Analysis: The taxable service under Section 65(105)(k) of the Finance Act, 1994 covered manpower recruitment or supply agency service, and Section 67 of the Finance Act, 1994 valued such service on the gross amount charged where consideration was received in money. The provident fund contribution, though referable to the assessee's statutory obligation under the Employees Provident Fund and Miscellaneous Provisions Act, 1952, was received from the client along with the agreed remuneration for deployment of manpower. On these facts, both components constituted the gross amount charged for the service. The principle that the taxable value cannot exceed the consideration for service did not assist the assessee because the amount in question was part of the money received for discharging the service arrangement and the statutory burden attached to the deployed employees.

Conclusion: The provident fund contribution was rightly included in the taxable value, and the demand and penalties were sustained.

Ratio Decidendi: For manpower recruitment or supply agency service, any amount received from the service recipient as part of the money charged for the service, including sums linked to the provider's statutory employee obligations, forms part of the gross amount charged under Section 67 of the Finance Act, 1994.

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