Principal-to-principal labour arrangement and pre-deposit compliance supported waiver of balance tax recovery in appeal.

A CESTAT Mumbai order on pre-deposit considered whether amounts raised under manpower recruitment service were not taxable on reverse charge basis. The Tribunal noted that the agreement showed a principal-to-principal arrangement, with the appellant exercising full control over the workers and paying salaries directly, and therefore recorded a prima facie view that the service did not fall within manpower recruitment service. It also found that the amount already deposited satisfied the statutory pre-deposit requirement under Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. The balance pre-deposit was waived and recovery of the remaining service tax, interest and penalty was stayed pending appeal.

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Issues: Whether the appellant had made out a prima facie case that the amounts demanded under the category of manpower recruitment service were not exigible on reverse charge basis, and whether the balance pre-deposit could be waived under the statutory provisions.

Analysis: The agreement between the appellant and the foreign entity indicated that the employees were sent on a principal-to-principal basis, with the appellant exercising full control and paying salaries directly to the employees. On that basis, the Tribunal recorded a prima facie view that the appellant did not fall within manpower recruitment service under reverse charge mechanism. It further held that the amount already deposited was sufficient compliance with the requirement of pre-deposit under Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994.

Outcome: Waiver of the balance pre-deposit was granted and recovery of the balance service tax, interest and penalty was stayed during the pendency of the appeal.

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