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of <h1>Appellant's Group Personnel Provision Not Deemed Manpower Service; Service Tax Dispute Resolved</h1> <h3>Muthoot Pappachan Management Consultancy Service Versus Commissioner of Central Excise, Customs and Service Tax Trivandrum</h3> The appellant's provision of personnel to group companies was deemed not to constitute supply of manpower service, as the activities were viewed as more ... Waiver of pre deposit - Manpower Supply service - centralized group company providing various services to other group company - MPCMS is providing personnel to MFL and other group companies - Held that:- According to the agreement between MPCMS and MFL in under terms and conditions, it is provided that MPCMS shall provide necessary personnel to the first party for its day-to-day operation and shall supervise and manage them as required by the law. The personnel will be considered and treated as employees of MPCMS and MFL shall in no way be responsible for their conduct, remuneration, service conditions, welfare etc. This clause alone would show that as claimed by the learned AR, according to the agreement the activity is one of Manpower Supply. Appellant does not have a prima facie case. However having regard to the nature of transactions and keeping in mind that the services have been provided only to the group companies and in some cases service has been provided free, we consider that if the appellant deposits an amount of ₹ 5,00,00,000/- (Rupees Five Crores only) which is much less than the demand for the normal period plus interest and less than 10% of the total demand involving service tax, interest and penalty - Partial stay granted. Issues:1. Whether the appellant's provision of personnel to group companies constitutes supply of manpower service.2. Whether the appellant is liable to pay service tax for the period in question.3. Whether the extended period can be invoked for demanding tax.4. Whether interest and penalties can be levied in this case.Analysis:Issue 1:The Department's case was that the appellant supplied personnel to group companies under their terms and conditions, indicating an employer-employee relationship. The Circulars and Board clarifications supported the view that manpower supply involves an employer-employee relationship between the supplier and the individual. However, the appellant argued that their activities were more about coordination and administrative convenience rather than supplying manpower. They highlighted that employees were directly employed by group companies, and no separate consideration was paid for manpower supply.Issue 2:The agreement between the appellant and a group company specified that personnel would be provided by the appellant for day-to-day operations, managed by the appellant, and treated as its employees. This clause indicated manpower supply. However, during the hearing, it was argued that the activities were more about coordination and administrative convenience rather than supplying manpower. The appellant offered to deposit a specified amount to hear the appeal, suggesting a willingness to resolve the matter.Issue 3:The appellant contended that the demand for tax was revenue-neutral as the group companies were registered service tax payers who could claim credit. Therefore, invoking the extended period for demanding tax would not be justified in a revenue-neutral situation.Issue 4:Regarding interest and penalties, the appellant argued that since the activity was not taxable, no interest or penalties should be levied. The Department, however, argued that the appellant's failure to pay tax amounted to a violation of the law, justifying the invocation of the extended period and imposition of penalties.In conclusion, the judgment considered the nature of the transactions, the arguments presented by both sides, and the willingness of the appellant to make a deposit. The decision to waive the pre-deposit of balance dues and grant a stay against recovery during the appeal process was based on these considerations, aiming for a resolution while ensuring compliance with legal requirements.
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