2022 (5) TMI 909 - AT - Service Tax

Tribunal ruling favors appellants in service classification dispute, setting aside demand & penalties

Mr. G. Sakthivel, Mr. S. Subburayalu, Mr. A. Athinarayanan and Mr. M. Arulprakasam Versus Commissioner of GST & Central Excise, Madurai

Mr. G. Sakthivel, Mr. S. Subburayalu, Mr. A. Athinarayanan and Mr. M. Arulprakasam Versus Commissioner of GST & Central Excise, Madurai - TMI Issues Involved:1. Classification of services provided by the appellants under 'Man Power Recruitment or Supply Agency Service'.2. Liability to pay service tax for the periods before and after June 2012.3. Correctness of the quantification of the demand for service tax.4. Imposition of penalties on the appellants.Detailed Analysis:1. Classification of Services:The primary issue was whether the services provided by the appellants to TAFE fell under the category of 'Man Power Recruitment or Supply Agency Service.' The appellants argued that they were engaged in assembling activities on a principal-to-principal basis using their own employees, and the control and supervision of these employees were with them. Payment was made on a piece-rate basis, which did not align with the definition of 'Man Power Recruitment or Supply Agency Service,' which involves providing manpower temporarily under the control of the service recipient.The Tribunal agreed with the appellants, noting that the contracts were for executing work, not supplying manpower. The Tribunal referenced previous decisions, including Bhagyashree Enterprises VS CCE Pune-I, which supported the appellants' stance.2. Liability to Pay Service Tax:For the period before June 2012, the Tribunal found that the appellants' activities did not fall within the definition of 'Man Power Recruitment or Supply Agency Service,' thus setting aside the demand for service tax. This decision was consistent with previous Tribunal rulings in similar cases involving TAFE.For the period after June 2012, the Tribunal acknowledged a change in the law and noted that the appellants had started paying service tax and had registered with the department. The Tribunal remanded the matter to the adjudicating authority to re-examine the liability based on the CBEC Circular No.190/9/2015-ST dated 15.12.2015, which clarified the distinction between manpower supply services and job work services.3. Correctness of the Quantification of the Demand:The appellants contested the quantification of the demand for the period after June 2012, arguing that the adjudicating authority erroneously included sundry creditors and other receipts in the taxable value. The Tribunal remanded the matter to the adjudicating authority to re-compute the service tax demand accurately.4. Imposition of Penalties:The Tribunal found that the imposition of penalties was unwarranted, given the interpretational nature of the issue and the appellants' compliance with registration and tax payment after 2012. The Tribunal set aside the penalties for the period after 2012, following its previous decisions.Conclusion:- The appeals for the period prior to June 2012 were allowed with consequential relief.- For the period after June 2012, the matters were remanded to the adjudicating authority for re-examination of the service tax liability and re-quantification of the demand.- Penalties imposed were set aside.Result:1. Appeal ST/41317/2015 filed by G. Sakthivel was allowed with consequential relief.2. Appeal ST/41821/2015 filed by S. Subburayulu was allowed with consequential relief.3. Appeal ST/42396/2016 filed by R. Athinarayanan was partly allowed by setting aside the demand prior to 1.7.2012 and penalties, and partly remanded.4. Appeal ST/42397/2016 filed by M. Arulprakasam was partly allowed by setting aside the demand prior to 1.7.2012 and penalties, and partly remanded.5. Appeal ST/40628/2018 filed by S. Subburayulu was partly allowed by setting aside the demand and penalties, and partly remanded.