2023 (5) TMI 245 - AT - Service Tax

Tribunal Classifies Services Under 'Manpower Recruitment,' Levies Tax on Charges Only, Sets Aside Penalties Due to Confusion.

M/s. Shri Vinayaga Enterprises Versus Commissioner of Central Excise & ST, Trichy

M/s. Shri Vinayaga Enterprises Versus Commissioner of Central Excise & ST, Trichy - 2023 (385) E.L.T. 521 (Tri. - Chennai) Issues Involved:1. Classification of services rendered by the appellant.2. Determination of the value on which service tax is payable.3. Applicability of penalties under the Finance Act, 1994.Summary:1. Classification of Services:The appellant, M/s. Shri Vinayaga Enterprises, contended that their services, which included unloading raw materials, loading finished goods, housekeeping, maintenance of garden and canteen, and machinery maintenance, should be classified under Business Auxiliary Service (BAS) rather than Manpower Recruitment or Supply Agency service. They argued that their work involved specific tasks with responsibilities beyond mere manpower supply.The Tribunal, however, after examining the agreement with M/s. Godrej Household Products Ltd., concluded that the services rendered were indeed classifiable under 'Manpower Recruitment or Supply Agency' service. The contract's terms indicated that the appellant was paid based on the number of people supplied, which aligned with the definition of manpower supply services.2. Determination of Value for Service Tax:The appellant argued that service tax should only be levied on the service charges (Rs. 84,027/-) and not on the entire amount received (Rs. 15,87,599/-), citing the Delhi High Court's decision in Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. UOI. They contended that reimbursements for wages paid should not be included in the taxable value.The Tribunal agreed that service tax should be computed based on the service charges paid to the appellant, considering the peculiar facts of the case and the agreement's terms, which specified service charges of Rs. 7/- per manpower for an 8-hour shift.3. Applicability of Penalties:The appellant claimed a bona fide belief that their services were not liable to service tax due to their classification under BAS and sought waiver of penalties under Section 80 of the Finance Act, 1994.The Tribunal acknowledged the appellant's status as a small entrepreneur and the prevailing confusion regarding service classification. Consequently, it set aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994.Conclusion:The Tribunal upheld the demand for service tax on the service charges paid to the appellant but set aside the penalties imposed. The appeal was partly allowed to this extent.