2016 (4) TMI 451 - AT - Service Tax

Tribunal clarifies service classification, remands for tax recalculation

The tribunal classified the service provided by the appellant as 'Manpower Recruitment and Supply Agency Services,' rejecting the appellant's claim of it ... Classification - Contract on lump-sum/job basis of Storage Warehouse and handling of Agricultural Produce - Whether the services needs to be classified under 'Manpower Recruitment and Supply Agency Services' as claimed by Revenue or 'Storage Warehouse and Handling of Agriculture produce' as claimed by the appellant - Held that:- the said Works Order, various terms and conditions, indicate that appellant has to produce attendance sheet, proof of actual payment towards statutory obligations like PF, ESIC etc., it would mean that the contract entered was for supply of unskilled manpower, that the bill has been made by the appellant as services charges for 'Storage Warehouse and Handling of Agricultural Produce' through Works Order given description of work and supply of unskilled Manpower are directly under the category of 'Manpower Recruitment and Supply Agency Services'. In view of these facts, the appellant has no case. Tax liability and interest - Held that:- it is not found from the Work Orders which were issued, that appellants need to be extended the benefit of cum tax benefit as the value shown on the bills indicated an amount received by them needs to considered as cum tax value and the Service Tax liability needs to be worked back. For this limited purpose the matter is remanded back to the original adjudicating authority to recalculate the tax liability and the interest thereof. Imposition of penalties - Held that:- appellant could have entertained a bonafide belief that the activity under-taken by them being in respect of 'Storage Warehouse and Handling of Agricultural Produce'; Service tax liability may not arises. Extending the benefit of doubt to the appellant, the provision of Section 80 of the Finance Act,1994 is invoked and the penalties imposed on the appellant are set aside. - Appeal disposed of Issues involved:Classification of service provided by the appellant during 2007-08 under 'Manpower Recruitment and Supply Agency Services' or 'Storage Warehouse and Handling of Agriculture produce.'Analysis:1. Classification of Service: The key issue in this case revolves around the classification of the service provided by the appellant. The dispute arises from whether the services should be categorized under 'Manpower Recruitment and Supply Agency Services' as contended by the Revenue or under 'Storage Warehouse and Handling of Agriculture produce' as claimed by the appellant.2. Arguments and References: The appellant entered into an agreement with M/s. Relogistics (India) Pvt. Ltd. and executed the works as assigned. The appellant's counsel referred to the Works Order and terms attached to it, emphasizing that the contract was for 'Storage Warehouse and handling of Agricultural Produce,' which is exempted. Reference was made to previous tribunal judgments and a High Court decision supporting the appellant's position.3. Analysis of Works Order: Upon reviewing the Works Order and terms, it was observed that the description indicated the supply of unskilled manpower and specified rates per person per day. The terms required the appellant to produce attendance sheets and proof of payments for statutory obligations like PF and ESIC. This led to the conclusion that the contract was for the supply of unskilled manpower falling under 'Manpower Recruitment and Supply Agency Services.'4. Remand for Tax Liability: While finding no merit in the appellant's case, the tribunal remanded the matter to the adjudicating authority to recalculate the tax liability and interest, as the value shown on bills needed reconsideration for cum tax benefits.5. Penalties and Benefit of Doubt: Regarding penalties, it was noted that the appellant may have genuinely believed their activities were related to 'Storage Warehouse and Handling of Agricultural Produce,' thus invoking Section 80 of the Finance Act, 1994, the penalties imposed on the appellant were set aside.6. Disposal of Appeal: Ultimately, the tribunal disposed of the appeal, directing a reassessment of tax liability, remanding the matter for recalculations, and relieving the appellant of penalties based on the benefit of doubt.This detailed analysis of the judgment highlights the core issues, arguments presented, tribunal's findings, and the outcome of the appeal, providing a comprehensive understanding of the legal decision.