2024 (6) TMI 849 - AT - Service Tax

Legal consultancy services classified as legal services not business auxiliary services, service tax cannot be recovered twice on same service

CESTAT Ahmedabad allowed the appeal by remand in a service tax classification dispute. The appellant provided legal consultancy services related to labour ... Classification of services - business auxiliary service or Legal Services - it was alleged that the Appellant neither obtained registration for service tax nor filed periodical returns under the provisions of Finance Act, 1994 - time limitation - HELD THAT:- It appears that the appellant have provided Legal Consultancy service in relation to labour law therefore, it prima facie appears that the service is correctly classifiable under legal service and the appellant being a service recipient is not prima facie liable for payment of service tax and if at all the service is not classifiable under legal service the appropriate category shall be Manpower Supply Service. However, this is subject to scrutiny of agreement, invoices, other documents - Both the lower authorities have not properly appreciated the overall facts and documentary evidence. Moreover, to classify the service as Business Auxiliary service the Revenue has no basis. It is observed that both the lower authorities have discarded this claim of the appellant without properly verifying the fact. The learned Commissioner (Appeals) discarded the claim of payment of service tax by service recipient on the ground that the same is not appearing in the ST -3 returns of EIPL. It is obvious that the detail of the parties for whose transaction the service tax is paid does not reflect in ST- 3 returns. However, this can be ascertained from the back documents such as books of account, parties ledger etc. The lower authorities have not taken any pain to verify the same therefore, rejecting the claim of the appellant that the service tax has been paid by the service recipient is absolutely incorrect. As regard the finding of the Learned Commissioner (Appeals) that even though the service recipient has paid the service tax the appellant is still liable to pay the service tax being a service provider is absolutely incorrect for the reason that in respect of any service, service tax has been paid by anyone, then the liability of the same service tax does not exit. Hence, the same cannot be recovered twice - irrespective of any classification of service if on the same service tax has been paid by the service recipient to that extent the service tax demand will not survive against the appellant. The matter should go back to the Adjudicating Authority to reconsider the entire matter - Appeal allowed by way of remand. Issues Involved:1. Classification of Services2. Liability to Pay Service Tax3. Demand Based on Income Tax Data4. Reimbursement of Expenses5. Limitation and Suppression of FactsSummary:1. Classification of Services:The appellant argued that the services provided were either 'Legal Services' or 'Manpower Supply Service,' both of which would place the liability to pay service tax on the recipient under Notification No. 30/2012. The lower authorities classified the service as 'Business Auxiliary Services.' The Tribunal found that the appellant provided legal consultancy services in relation to labor law, which prima facie falls under legal services, or alternatively, under manpower supply service. The Tribunal noted that the lower authorities did not properly scrutinize the agreement, invoices, and other documents to classify the service accurately.2. Liability to Pay Service Tax:The appellant contended that the recipient, M/s. Echjay Industries Pvt Ltd (EIPL), had paid the service tax under the Reverse Charge Mechanism (RCM) for the services provided. The Tribunal observed that if the service tax has already been paid by the recipient, it cannot be recovered again from the appellant. The Tribunal found the lower authorities' rejection of this claim without proper verification to be incorrect.3. Demand Based on Income Tax Data:The appellant argued that the demand was based solely on data from the Income Tax Department without an independent inquiry. The Tribunal agreed that service tax demand cannot be based on income tax data alone without a separate independent inquiry, citing precedents like Krishna Construction Vs. CST, Bhavnagar and Forward Resources Pvt. Ltd. Vs. CCE, Surat-I.4. Reimbursement of Expenses:The appellant claimed that the reimbursement of expenses for managing the workforce of EIPL does not attract service tax liability. The Tribunal noted that the lower authorities did not provide evidence such as vouchers, invoices, or bills to support the claim that the appellant made reimbursements to the laborers.5. Limitation and Suppression of Facts:The appellant argued that the extended period for issuing the Show Cause Notice was not invokable as the facts were within the knowledge of the department through ST-3 returns filed by EIPL. The Tribunal found that there was no suppression of facts and cited relevant judgments to support this view.Conclusion:The Tribunal set aside the impugned order and remanded the matter back to the Adjudicating Authority for reconsideration. All issues were kept open for further scrutiny. The Tribunal emphasized that service tax cannot be recovered twice for the same service and directed the Adjudicating Authority to verify the claims regarding the payment of service tax by the recipient. The appeal was allowed by way of remand.