2018 (2) TMI 1122 - AT - Service Tax

Tribunal modifies service tax demand on EPF & ESI, upholds packing service charge, dismisses stitching & washing charges

The Tribunal modified the order, deleting the service tax demand related to EPF and ESI as the liability to contribute to these funds lies with the ... Manpower and recruitment agency service - demand of service tax of ₹ 6,60,859/- pertaining to EPF and ESI - Held that: - service tax demand cannot be confirmed on the employer’s contributed amount towards P.F., E.P.F. and E.S.I. - demand set aside. Service of packing - job of packing / branding of toilet soap in the factory of M/s. Godrej Consumer Products - demand of service tax - Held that: - it appears that packing cost included in the final product and excise duty was paid by M/s. Godrej. But no duty was paid by the appellant. Appellant is providing the services of packing of soap cake which is essentially a labour supply contract and not a packaging service as contended by the appellant. The appellant has not paid the service tax on the final product - demand upheld. Demand of ₹ 60,728/- pertaining stitching and washing charges which has been received from clients - Held that: - learned Counsel has submitted that she is not contesting this demand. Same is dismissed as not contested. Appeal allowed in part. Issues:1. Demand of service tax pertaining to EPF and ESI2. Demand of service tax for packing services3. Demand of service tax for stitching and washing chargesAnalysis:Issue 1: Demand of service tax pertaining to EPF and ESIThe appellant, a manpower recruitment agency, was demanded service tax on the amount deposited to EPF and ESI. The Tribunal referred to a previous case where it was established that the liability to contribute to these funds lies with the principal employer, not the service provider. As the amount was contributed by the service receiver and not given to the appellant, the service tax liability does not include this amount. Therefore, the Tribunal modified the order and deleted the service tax demand related to EPF and ESI.Issue 2: Demand of service tax for packing servicesThe appellant provided packing services for toilet soap in a factory, and a demand of service tax amounting to Rs. 60,000 was made. The appellant argued that since excise duty was paid by the manufacturer on the entire value, service tax should not be levied. However, the Tribunal found that the appellant did not pay excise duty on the final product, making it a labor supply contract rather than a packaging service. As a result, the Tribunal upheld the impugned order and dismissed the appeal regarding the service tax demand for packing services.Issue 3: Demand of service tax for stitching and washing chargesRegarding the demand of Rs. 60,728 for stitching and washing charges received from clients, the appellant did not contest this demand during the arguments. Consequently, the Tribunal dismissed this demand as not contested. Overall, the appeal was partially allowed, with the service tax demand related to EPF and ESI being deleted, while the demands for packing services and stitching/washing charges were upheld or dismissed based on the arguments presented.