2025 (3) TMI 333 - AT - Service Tax

Welfare organization wins appeal on service tax exemption for government manpower services and first aid training

CESTAT Chandigarh allowed the appeal of a welfare voluntary organization created under Indian Red Cross Society Act, 1920. The tribunal held that manpower ... Manpower Recruitment and Supply Agency Service - Commercial Training and Coaching Service - Providing first aid training to the students of the schools and colleges - extended period of limitation. Man Power Recruitment and Supplies Agency Service - HELD THAT:- The appellant is admittedly a Welfare & Voluntary Organisation created under the Indian Red Cross Society Act, 1920 and the Deputy Commissioner (DC) of Chandigarh is the Chairman of the said society. It is also found that the appellant only provides temporarily the Man Power to registration and licesensing authority for the purpose of expedition of issuance of Driving Licences and Registration Certificates of Motor Vehicles in the RLA Office where there is an acute shortage of staff - the appellant is paid a fixed share out of the fees for issuance of Driving Licences/Registration Certificates of vehicles as a lump-sum amount on per case basis. Providing first aid training to the students of the schools and colleges - HELD THAT:- The Government is not covered by the terms “person”. Further, the definition of “person” was amended only in 2012 to include Government but the period involved in the present case is prior to 2012, therefore, the service provided to the Government will not be covered in the term “to any person” and therefore will not be taxable. It is also found that the first aid training to the students is a part of their syllabus of health education for class 9th prescribed under CBSE and only a nominal fees is paid by the students. Extended period of limitation - HELD THAT:- The suppression cannot be alleged against the appellant which is a non-profit making society working under the direct control of the Deputy Commissioner of Chandigarh and the adjudicating authority has also dropped the penalty under Section 80 by observing that extended period cannot be invoked; therefore, once the extended period cannot be invoked, the liability for the normal period. The impugned order is not sustainable in law - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the services rendered by a welfare/voluntary organisation to the Registering and Licensing Authority (RLA) - supplying personnel to assist in preparation/issuance of driving licences and registration certificates - constitute 'Manpower Recruitment and Supply Agency Service' chargeable to service tax. 2. Whether the provision of 'First Aid' training by the welfare/voluntary organisation to students and employees for a nominal fee constitutes 'Commercial Training and Coaching Service' chargeable to service tax for the period in question. 3. Whether the imposition of demand for service tax for periods beyond the normal limitation is sustainable: (a) whether suppression of facts was established to invoke the extended period; and (b) whether, having rejected extended period, any liability for the normal period survives. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Taxability as Manpower Recruitment and Supply Agency Service Legal framework: The taxability turns on whether the activity falls within the statutory definition of 'Manpower Recruitment and Supply Agency Service' (as understood under the service tax regime applicable during the period April 2005-March 2009). Key considerations include nature of engagement, control over personnel, payment mode (per head vs per job), and whether the service-provider is a 'commercial concern'. Precedent treatment: The Tribunal relied on earlier Tribunal authority cited by the appellant (S.S. Associates v. CCE, Bangalore) supporting the proposition that certain outsourced assistance, particularly where arrangements are for statutory functions and not commercial supply of manpower, may not attract the manpower-supply classification. Interpretation and reasoning: The Tribunal found the following facts decisive: the appellant was a welfare/voluntary organisation constituted under a statutory Act; the Deputy Commissioner chaired the organisation; the organisation recruited and engaged staff on its own rolls and retained control over them; it received a fixed lump-sum share per case (per item/job) from fees charged by the RLA rather than payments tied to number of persons supplied; the work assisted in discharge of statutory duties of the RLA in circumstances of acute shortage of staff; and the organisation operated on a no-profit/no-loss basis and did not qualify as a 'commercial concern'. These features lead to the conclusion that the arrangement did not amount to commercial manpower recruitment/supply but was assistance in statutory discharge of duties and was not within the intended scope of manpower supply service. Ratio vs. Obiter: Ratio - where personnel remain on service-provider's rolls, are under its control, remuneration is a fixed per-job lump sum (not per-person supply), and the provider is a non-commercial statutory/welfare entity assisting a government function, such arrangement does not constitute taxable manpower recruitment/supply service. Obiter - any broader comments on different factual variations (e.g., where government exercises operational control or where payments reflect per-person deployment) are ancillary. Conclusion: The Tribunal concluded the service did not fall within the Manpower Recruitment and Supply Agency Service and therefore the tax demand on that ground was unsustainable. Issue 2 - Taxability of First Aid Training as Commercial Training and Coaching Service Legal framework: Taxability depends on the statutory definition of 'Commercial Training and Coaching Service' operative during the relevant period and on statutory amendments affecting the phrase 'to the client' ? 'to any person' (effective 10.05.2008) and subsequent amendment (in 2012) regarding inclusion of Government within 'person'. Also relevant is whether the training was curricular (part of CBSE-prescribed syllabus) and whether consideration charged was a nominal fee. Precedent treatment: The Tribunal considered legislative amendments and the temporal scope of those amendments. It treated the 2012 amendment (including Government within 'person') as inapplicable to the period under scrutiny. Interpretation and reasoning: The Tribunal reasoned that (a) First Aid training provided to students formed part of the prescribed school syllabus (Health Education for class 9) and was not a standalone commercial training for profit; (b) only nominal fees were charged as fixed by the national head office; (c) the statutory wording change (to 'any person' from 'to the client') effected on 10.05.2008 did not operate to include government recipients in the term 'any person' for the period at issue, and the explicit inclusion of Government within 'person' occurred only by amendment in 2012; therefore services provided to or in conjunction with government functions/entities prior to that amendment were not brought within the taxable ambit by the 2008 substitution; and (d) consequently, the First Aid training prior to the 2012 amendment was not taxable as commercial training/coaching. Ratio vs. Obiter: Ratio - First Aid training that (i) is part of an academic syllabus, (ii) is provided by a voluntary/welfare organisation charging only nominal fees and (iii) is provided in circumstances where statutory definitions and amendments do not cover government-related recipients during the relevant period, does not constitute taxable Commercial Training and Coaching Service for that period. Obiter - broader applicability to other training circumstances where fees, profit motive, or non-curricular nature differ. Conclusion: The Tribunal held that the First Aid training was not taxable as Commercial Training and Coaching Service for the period in question. Issue 3 - Limitation and Invokation of Extended Period (Suppression/Sectional Penalty Implications) Legal framework: The extended period for demand requires proof of suppression of facts with intent to evade tax; absent such suppression the normal limitation applies. Penalty provisions and invoking of extended limitation are fact-sensitive and interrelated with findings on intent and status of the assessee (governmental/welfare body). Precedent treatment: The Tribunal relied on the adjudicating authority's own dropping of penalty under one provision (Section 78) by invoking non-invocation of extended period and on CESTAT Delhi authority (Shaym Spectra) for the proposition that if extended period cannot be invoked, liability for the normal period also fails in the circumstances addressed. Interpretation and reasoning: The Tribunal observed that the appellant was a non-profit society under direct control of the Deputy Commissioner; there was no finding of suppression with intent to evade tax; the adjudicating authority itself refrained from imposing penalty under Section 78 on the ground that extended period could not be invoked. In this factual matrix, and consistent with the precedent relied upon, the Tribunal concluded that extended period could not be invoked and, consequently, demands for periods beyond the normal limitation could not be sustained; further, where extended period is uninvokable and no suppression is established, recoveries for the normal period were also not maintainable in the circumstances of the present case. Ratio vs. Obiter: Ratio - in absence of suppression with intent to evade tax and where the assessee is a non-profit/welfare body under governmental control, extended limitation cannot be invoked and corresponding demands for the contested period are unsustainable; reliance on prior administrative dropping of penalties strengthens this outcome. Obiter - application to differing factual patterns (e.g., clear profit motive, deliberate concealment) is not addressed. Conclusion: The Tribunal concluded that the demand was time-barred/unsustainable to the extent based on extended period; no suppression was proved; consequential normal-period liability also did not survive in the circumstances, warranting setting aside of the impugned demand. Disposition The Tribunal, applying the foregoing reasoning, set aside the impugned order, allowed the appeal and provided consequential relief as per law.