Malaysian Government authorized screening tests exempt from service tax demand of Rs. 36 lakh

CESTAT Chennai set aside service tax demand of Rs. 36,36,856/- against appellant authorized by Malaysian Government for screening tests and biometric registration of employment seekers. Appellant collected Rs. 2000/- per candidate including US$ 30 paid to Malaysian entity. Tribunal held appellant acted as pure agent for biometric registration fees, with remaining amount exempt under medical screening notification. Since appellant succeeded on merits, extended period invocation was not examined. Appeal allowed.

---

---

Issues Involved:

1. Whether the service received from M/s. Bestinet, Malaysia is to be treated as import of service and consequently demand of Service Tax of Rs.36,36,856/- under reverse charge basis is justifiedRs.
2. Whether invocation of extended period in terms of Section 73(1) of the Finance Act, 1994 is maintainable or not considering the facts of the caseRs.

Summary:

Issue 1: Import of Service and Service Tax Demand

The Medical Services Agreement between the appellant (Al-Haramain Diagnostic Centre) and M/s. Bestinet SDN BHD, Malaysia, involved the provision of hardware and software for the Foreign Workers Centralized Management System (FWCMS). The appellant paid fees for the supply, installation, and commissioning of this system. The original adjudicating authority considered this as a 'supply of tangible goods' service, but did not quantify the tax demand in the final order. The primary issue was whether the fees of US$ 15 (later US$ 30) collected for biometric registration should be subjected to Service Tax. The appellant argued that they acted as an agent for M/s. Bestinet and that the foreign workers were the actual service recipients. The appellate authority concluded that the appellant and M/s. Bestinet collaborated to provide the service, making the foreign workers the service recipients. The appellant did not collect any additional consideration for biometric registration, thus the demand of Rs.36,36,856/- for Service Tax was not justified. The appellant succeeded on merits, negating the need for further discussion on the extended period.

Issue 2: Invocation of Extended Period

The appellant contended that the extended period for demand under Section 73(1) of the Finance Act, 1994, was not applicable as there was no intent to evade duty. They relied on various judicial precedents to argue that mere non-declaration or failure to pay duty due to a bona fide belief does not constitute suppression of facts. The appellant maintained that all relevant information was disclosed to the authorities, and there was no deliberate withholding of information. Given the findings on the merits of the case, the invocation of the extended period was not necessary to address.

Conclusion:

The impugned order was set aside, and the appeal was allowed with consequential reliefs as per law. The appellant's collection of fees for biometric registration, which was paid to M/s. Bestinet, was not subject to Service Tax under the reverse charge mechanism. The appellant was deemed to act as a pure agent for the biometric registration service, and the amounts collected for screening tests were exempt under Notification No. 25/2012-ST dated 20.06.2012.

---