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Service tax demands set aside for contract manufacturing and property rental services due to misclassification and time-barred proceedings CESTAT Hyderabad set aside service tax demands on appellant for contract manufacturing and property rental services. The tribunal held that manufacturing ...
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Service tax demands set aside for contract manufacturing and property rental services due to misclassification and time-barred proceedings
CESTAT Hyderabad set aside service tax demands on appellant for contract manufacturing and property rental services. The tribunal held that manufacturing agreements clearly established contract manufacturing of alcoholic beverages rather than manpower supply services, rejecting the original classification. For property rental services during 2008-2009, the demand was time-barred as the show cause notice was issued beyond the one-year limitation period under Section 73 of Finance Act. The tribunal noted significant legal confusion regarding property rental taxation during this period, which was later resolved through retrospective amendment. All penalties were set aside and appeal allowed.
Issues involved: The judgment deals with the issues of liability to pay service tax under the categories of 'Manpower Recruitment Agency Service' and 'Renting of Immovable Property services' by a company engaged in the manufacture of Indian Made Foreign Liquor (IMFL) on job work basis.
Manpower Recruitment Agency Service Issue: The Appellant, a distillery engaged in manufacturing IMFL on job work basis, was issued a Show Cause Notice for demanding service tax under the category of Manpower Recruitment Agency Service. The Commissioner confirmed the demands, citing clauses from the manufacturing agreement as evidence of manpower supply. However, the Appellant argued that the services provided were for contract manufacturing of IMFL and not for manpower supply. The Tribunal agreed with the Appellant, noting that the consideration received was based on the goods manufactured and not for the manpower supplied. Precedent rulings were cited to support the decision, and the demand for service tax under 'Manpower Recruitment and Supply service' was set aside.
Renting of Immovable Property Services Issue: Regarding the demand for service tax on renting of immovable property during 2008-2009, the Appellant contended that there was confusion and disputes on the levy of tax on such services during that period. The Tribunal acknowledged the confusion and retrospective amendment to resolve the issue. The demand for tax for the period in question was found to be barred by limitation, and therefore, the demand was set aside. The judgment concluded by allowing the appeal with consequential relief and setting aside all penalties.
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