Tribunal confirms service tax demand against cooperative society for Manpower Recruitment services

The Tribunal upheld the Adjudicating Authority's decision, confirming the demand of Rs.91,03,830/- for service tax, interest, and penalties against the appellant, a cooperative society providing Manpower Recruitment services to ONGC. The appellant's argument of not being a commercial concern was rejected, holding them liable for service tax under the General Clauses Act. The extended period for demand and penalties under the Finance Act was deemed justified due to the appellant's non-cooperation. The appeal was dismissed on 22.09.2023.

---

---

Issues Involved:

1. Whether the appellant, a society registered under the Andhra Pradesh Co-operative Societies Act, 1964, is liable to pay service tax for providing Manpower Recruitment or Supply Agency services to ONGC.
2. Whether the appellant's contention that they are not a commercial concern and thus not liable for service tax is valid.
3. Whether the extended period for demand and penalties under the Finance Act, 1994, is applicable.

Summary:

Issue 1: Liability to Pay Service Tax

The appellant, a society registered under the Andhra Pradesh Co-operative Societies Act, 1964, provided Manpower Recruitment or Supply Agency services to ONGC during 2005-06 to 2009-10. The Adjudicating Authority confirmed the demand for service tax, stating that service tax is required to be paid when services are rendered by "any person" to "any person," including societies. The appellant failed to attend hearings and provide necessary details, leading to an ex-parte decision.

Issue 2: Commercial Concern

The appellant argued that being a cooperative society, they should not be considered a commercial concern and thus not liable for service tax. However, the Adjudicating Authority referenced the Central Board of Excise & Customs Circular No. 96/7/2007-ST and various judicial precedents, concluding that the society operates on a commercial basis, charging for services and maintaining payrolls and statutory obligations. The society was thus deemed a "person" under Section 3(42) of the General Clauses Act, 1897, and liable for service tax.

Issue 3: Extended Period and Penalties

The extended period for demand was justified due to the appellant's non-cooperation and failure to furnish required information, indicating malafide intention to evade tax. The Adjudicating Authority imposed penalties under Sections 77 and 78 of the Finance Act, 1994, but reduced the penalty under Section 78 if the appellant paid the determined service tax, interest, and reduced penalty within thirty days.

Conclusion:

The Tribunal upheld the Adjudicating Authority's detailed and considered decision, confirming the demand of Rs.91,03,830/- for service tax, along with interest and penalties, and dismissed the appeal filed by the appellant. The decision was pronounced in open court on 22.09.2023.

---