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of <h1>Tribunal rules in favor of appellants, rejecting Service Tax demand.</h1> <h3>M/s S.L. Bajaj Versus The Commissioner of Central Excise and Service Tax, Chandigarh-II</h3> M/s S.L. Bajaj Versus The Commissioner of Central Excise and Service Tax, Chandigarh-II - TMI Issues Involved:1. Classification of services provided by the appellant.2. Inclusion of salary, EPF, and ESI in the gross value of taxable services.3. Applicability of 'pure agent' concept.4. Taxability of services provided before 01.05.2006.5. Invocation of extended period for demand due to alleged suppression.Summary:1. Classification of Services:The appellants provided drivers, conductors, and workshop personnel to M/s Punjab Road Transport Corporation (PRTC) under a contract. The Revenue classified these services as 'Manpower Recruitment or Supply Agency' under Section 65(68) of the Finance Act 1994, leading to a show cause notice for recovery of Service Tax amounting to Rs 70,77,922/-. The Commissioner confirmed a demand of Rs.63,50,280/- after allowing cum-duty benefits, along with penalties under Sections 78 and 77.2. Inclusion of Salary, EPF, and ESI:The appellants argued that salary, EPF, and ESI should not be included in the gross value of taxable services as per Section 67 of the Finance Act 1994. They cited the Supreme Court's decision in Inter-Continental Consultants and Technocrats Pvt. Limited, which held Rule 5 of Service Tax (Determination of Value) Rules, 2006 as ultra vires of Section 67. The Tribunal referred to its decision in M.P. Security Force, holding that contributions towards PF and ESI should not be included in the gross amount if deposited with the government.3. Applicability of 'Pure Agent' Concept:The appellants claimed they acted as a 'pure agent' of PRTC, and reimbursable expenses should not be included in the taxable value. The Revenue countered that the appellants did not enter into a contract as pure agents and PRTC was merely a client. The Tribunal found that wages and other statutory contributions indicated by PRTC should be treated as reimbursable expenses and not included in the assessable value.4. Taxability Before 01.05.2006:The appellants contended that they were not a 'Commercial Concern' and thus not taxable before 01.05.2006. The Revenue cited Tribunal decisions indicating that a proprietary firm engaged in commercial activity qualifies as a 'Commercial Concern.' However, the Tribunal deemed this issue redundant as the appellants succeeded on both merits and limitation.5. Invocation of Extended Period:The appellants argued that the issue was time-barred, asserting a bona fide belief based on PRTC's circular that wages and deductions were not taxable. The Tribunal held that mere non-registration, non-filing of returns, and non-payment of service tax do not constitute suppression with intent to evade tax. The Department failed to provide evidence of deliberate suppression, leading the Tribunal to rule that the extended period could not be invoked.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants on both merits and limitation.
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