2009 (9) TMI 276 - AT - Service Tax

Appellate Tribunal CESTAT: Service tax dispute within Hindu Undivided Family

The Appellate Tribunal CESTAT, Bangalore, ruled in favor of the respondent in a service tax dispute involving services provided by a constituent unit of a ... Manpower recruitment or supply agency’s services- The assessee was one of the constituent units of an HUF having 9 other constituent units. The assessee had rendered services in the form of manpower supply to other constituent units of HUF, sister concerns and group companies. It had not paid service tax on the amount representing the services rendered to its constituents on the ground that different units of HUF were to be treated as one legal entity and were not liable to service tax and imposed penalty on the ground that all the constituent unit of HUF were independent concerns/companies having independent business activities and hence service tax was payable on the amount received from their HUF constituents. Commissioner (Appeals) set aside the order. In the light of the decision of Precot Mills Ltd. v CCE 2006 -TMI - 479 - Appellate Tribunal, Bangalore, held that- revenue itself acknowledged the existence of HUF and the other units as the constituents of HUF which was very evident from the records, thus the order of Commissioner (Appeals) uphold and appeal filed by revenue rejected. The Appellate Tribunal CESTAT, Bangalore, in the case of M.V. Ravindran, Judicial Member and P. Karthikeyan, Technical Member, heard an appeal filed by the revenue against the Order-in-Original No. 23/2008(H-III)ST, dated 25-7-2008. The appeal concerned a dispute over the liability of service tax on services provided by a respondent, a constituent unit of a Hindu Undivided Family (HUF), to other constituent units of the same HUF. The respondent had paid service tax on amounts received from certain units, but not on services provided to other units of the HUF, arguing that all HUF units should be treated as a single legal entity and therefore not liable for service tax. The revenue, however, contended that the respondent's services to other HUF units constituted taxable services, and that the respondent had failed to disclose this information to the department.After considering the arguments presented by both parties, the Tribunal reviewed the facts and relevant legal provisions. The Tribunal noted that the respondent had produced a Chartered Accountant Certificate and Registration Certificate of Professional Tax to support their claim that all units belonged to the HUF. Additionally, the respondent had changed its name to Ramoji Rao-HUF in its service tax registration certificate. The Tribunal also referenced a previous case involving a similar situation, where the Tribunal had ruled that service tax need not be paid on services provided to constituents of an HUF. Based on these findings and precedents, the Tribunal concluded that the respondent's services to other HUF units were akin to providing services to itself, and therefore not subject to service tax. The Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the revenue's appeal.In summary, the Tribunal's judgment clarified the tax liability on services provided by a constituent unit of an HUF to other units within the same HUF, ultimately ruling that such services were not taxable under the prevailing legal framework. The decision underscored the importance of considering the legal structure and relationships between entities in determining tax obligations.