2025 (3) TMI 124 - AT - Service Tax

Manpower Supply Service provider not liable for service tax on reimbursable salary, PF and ESIC expenses under Section 67

Bhanwar Lal Gurjar Versus Commissioner of CGST & Central Excise, Jaipur – I

CESTAT New Delhi allowed the appeal, holding that the appellant was not liable to pay service tax on full consideration received for Manpower Supply ... Liability to pay service tax - full consideration received for providing the ‘Manpower Supply Service’, including salary, PF and ESIC - HELD THAT:- The issue raised in the present case is whether the appellant is liable to pay service tax on the full consideration received for providing the ‘Manpower Supply Service’, including salary, PF and ESIC, which has been considered in the case of appellant themselves by the Hon’ble Rajasthan High Court, titled as Bhanwar Lal Gurjar Vs. Commissioner of CGST & Service Tax – Jaipur [2019 (12) TMI 890 - RAJASTHAN HIGH COURT], where the Division Bench considered the same issue and following the decision of the Hon’ble Apex Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT]. The period involved in the show cause notice is April 2012 to July 2012 and the demand has been made by virtue of Section 67 of the Act read with Rule 5 of the Service Tax (Determination of Value) Rules, 2006. In view of the law laid down by the Hon’ble Apex court in Intercontinental Consultants and Technocrats Pvt. Ltd., the demand made under Section 67 is not sustainable as it does not include the reimbursable expenses for providing such service during the period in question. Conclusion - The appellant was not liable to pay service tax on the full consideration received for providing 'Manpower Supply Service' and that the demand made under Section 67 was not sustainable. There are no merits in the impugned order and the same is hereby set aside - appeal allowed. The issues presented and considered in the legal judgment are as follows:1. Whether the appellant is liable to pay service tax on the full consideration received for providing 'Manpower Supply Service', including salary, PF, and ESIC.2. Whether the demand made under Section 67 of the Act, read with Rule 5 of the Service Tax (Determination of Value) Rules, 2006, is sustainable.Issue 1: Liability to Pay Service Tax on Full ConsiderationThe relevant legal framework and precedents considered by the Court include Section 67 of the Finance Act, 1994, and Rule 5 of the Service Tax (Determination of Value) Rules, 2006. The Court interpreted these provisions in light of the decision of the Hon'ble Rajasthan High Court in Bhanwar Lal Gurjar v. Commissioner of CGST & Service Tax, where the Division Bench emphasized the importance of the gross amount charged for providing taxable services.Key evidence and findings indicate that the appellant had not discharged service tax on the gross amount received from recipients of services but only on the commission amount. The Court applied the law to the facts by analyzing the legislative intent behind Section 67 and Rule 5 to determine the taxable value of services provided.Competing arguments were considered, including the appellant's contention that the demand made under Section 67 was not sustainable due to the exclusion of reimbursable expenses for providing the service during the relevant period.The Court concluded that the demand made under Section 67 was not sustainable as it did not include reimbursable expenses for providing the service during the period in question. The Court relied on the decision in Intercontinental Consultants and Technocrats Pvt. Ltd. to support this conclusion.Issue 2: Sustainability of Demand under Section 67The Court's interpretation and reasoning focused on the legislative intent behind Section 67 and the implications of Rule 5 of the Service Tax Rules. The Court highlighted the importance of the gross amount charged for providing taxable services and the limitations on valuation imposed by the law.The Court's significant holdings include the determination that the demand made under Section 67 was not sustainable due to the exclusion of reimbursable expenses for providing the service during the relevant period. The Court set aside the impugned order and allowed the appeal based on this finding.In conclusion, the Court held that the appellant was not liable to pay service tax on the full consideration received for providing 'Manpower Supply Service' and that the demand made under Section 67 was not sustainable. The appeal was allowed, and the impugned order was set aside.The core principle established by the Court is that the valuation of taxable services for charging service tax should be based on the gross amount charged for providing the service, and any reimbursable expenses incurred in providing the service should be included in the valuation.