Manpower recruitment agency wins service tax dispute worth Rs. 5,11,989 due to vague demand notice and limitation issues

CESTAT Allahabad set aside service tax demand of Rs. 5,11,989 along with interest and penalty against a manpower recruitment agency. The SCN was held vague as it failed to specify the nature of services on which service tax was sought to be recovered for the pre-2012 period when only defined services under Section 65(105) were taxable. The demand was also barred by limitation since it was based on publicly available balance sheet figures but invoked extended limitation period. Appeal allowed.

---

---

The legal judgment issued by the Appellate Tribunal CESTAT ALLAHABAD addressed several key issues and considerations. The core legal questions examined in the judgment include the validity of the demand for service tax, the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994, the sufficiency of the Show Cause Notice (SCN), and the application of the extended period of limitation.The Tribunal analyzed the case in detail, considering the relevant legal framework, precedents, evidence, and arguments presented by both parties. The key findings and conclusions of the Tribunal are as follows:1. The Tribunal noted that the SCN issued to the Appellant lacked specificity regarding the nature of services on which the service tax demand was based. As the charge of service tax during the relevant period was only applicable to services defined under specific clauses, the vague nature of the SCN rendered the demand unsustainable in law.2. The Tribunal emphasized that the demand for service tax was barred by limitation as it was raised by invoking the extended period of limitation. The Tribunal cited precedents to support the position that demands based on figures from public documents like Balance Sheets cannot be made under the extended period of limitation.3. Due to the deficiencies in the SCN and the lack of material particulars for raising the demand, the Tribunal set aside the demand for service tax of Rs.5,11,989/- along with interest and equal penalty under Section 78.4. The Tribunal also addressed the Appellant's arguments regarding the non-consideration of a payment of Rs.4,18,259/- and certain excess payments made. However, without relevant material being placed on record, the Tribunal could not provide specific directions on these issues.In conclusion, the Tribunal allowed the appeal of the Appellant, providing consequential relief. The judgment was pronounced on 04.03.2025, with the Tribunal setting aside the demand for service tax and penalties due to limitations in the SCN and the lack of specificity regarding the nature of services. The Appellant was granted relief based on these findings.

---