2018 (12) TMI 1037 - AT - Service Tax

Tribunal Rules in Favor of Appellant in Manpower Deputation Case

The Tribunal, considering the precedent set in the M/s. Turbo Energy Ltd. case, ruled in favor of the appellant, stating that the deputation of employees ... Non-payment of service tax - Manpower Supply Service - collection of Deputation Charges for the above said service during the period from 16.06.2005 to 31.03.2007 - service tax for 01.04.2007 from March 2009 was only paid - Held that:- Tribunal in the case of M/s. Turbo Energy Ltd. Vs. C.G.S.T. & C.Ex., Chennai Outer & vice versa [2018 (9) TMI 1729 - CESTAT CHENNAI] placing reliance in the case of CST Vs Arvind Mills Ltd. [2014 (4) TMI 132 - GUJARAT HIGH COURT], has held that subsidiary companies cannot be said to be client of holding company and the deputation of employees was only for and in the interest of the company; there is no relation of agency and client - demand set aside - appeal allowed - decided in favor of appellant. Issues:Service tax liability on Manpower Supply Service rendered by the appellant to a subsidiary without payment of tax, applicability of the decision in the case of M/s. Turbo Energy Ltd. on the current case, time-barred demand for service tax on employees deputed to a specific company.Analysis:The appellant, holding Service Tax Registration for various services, was found to have rendered Manpower Supply Service to a subsidiary without paying service tax for a specific period. A Show Cause Notice was issued proposing a demand for service tax, interest, and penalty, which was confirmed by the adjudicating authority and upheld by the first appellate authority. The appellant appealed, citing the decision in the case of M/s. Turbo Energy Ltd. where a similar issue was decided in favor of the assessee.During the hearing, the appellant's advocate referenced the decision in M/s. Turbo Energy Ltd. case, where it was held that the deputation of employees to subsidiaries did not constitute a Manpower Supply Recruitment Agency service as there was no agency-client relationship. The Tribunal had allowed the appeal in that case based on this reasoning. The Revenue, however, supported the lower authorities' findings.Upon considering the M/s. Turbo Energy Ltd. case, the Tribunal found that the facts were identical to the current case. The Tribunal reiterated the key points from the previous judgment, emphasizing the absence of an agency-client relationship in such deputations. As the Revenue could not provide contrary decisions, the Tribunal concluded that the impugned Order needed to be set aside, allowing the appeal with consequential benefits as per law.In the specific context of the demand for service tax on employees deputed to a particular company, the Tribunal noted that while the demand was found to be time-barred, the lower appellate authority had incorrectly advised the appellant to settle the disputed amount under Section 73 (3) of the Finance Act, 1994. The Tribunal clarified that such an option is available only at the initial stage of discovering the liability, not after the demand has been confirmed through adjudication. Consequently, the Tribunal set aside that portion of the order and allowed the appellant's appeal with any consequential benefits as per law.