Appellant's Service Tax Liability Dismissed for Consultancy Expenditure and Manpower Supply

The Tribunal found the appellant not liable for service tax on consultancy expenditure as the income had already suffered tax and there was no agreement for consultancy services. Regarding service tax on manpower supply, it was determined that neither the appellant nor the international company qualified as a manpower supply agency, leading to the dismissal of tax liability. The original order was deemed unsustainable, and the appeal was allowed in favor of the appellant with consequential benefits.

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Issues:
1. Liability of the appellant for service tax on certain expenditure related to consulting engineer services and manpower supply.

Analysis:

Issue 1: Liability for service tax on consultancy expenditure
The appellant, a project office of an international company, was under dispute for service tax liability on expenditure shown in their books related to projects in India. The Revenue claimed the appellant received consultancy services from the international company, which was reflected in their accounts. However, the appellant argued that they were not liable for service tax as per their agreement with Indian clients, where they discharged the tax liability. The Tribunal noted that the income accruing to the international company had already suffered service tax, and the expenditure for the same service could not be taxed again, even under reverse charge. Additionally, as there was no agreement for consultancy services between the appellant and the international company, the tax liability on the expenditure was deemed unsustainable.

Issue 2: Service tax liability on manpower supply
The dispute also involved service tax liability on manpower supply, where employees were deputed by the international company to work for Indian clients. The appellant contended that they did not receive any manpower supply service as the employees were utilized by the international company. The Tribunal referred to previous judgments, including one by the Allahabad High Court, which held that deputation of employees for work did not constitute manpower supply. It was established that neither the appellant nor the international company could be considered as a manpower supply agency, leading to the conclusion that the tax liability under this category was not sustainable.

In conclusion, the Tribunal found the original order unsustainable and set it aside, allowing the appeal in favor of the appellant with consequential benefits.

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