Reverse charge on manpower supply and threshold exemption defeated a service tax demand based only on return mismatches.

Manpower supply performed under the recipient's control and supervision was treated as a manpower supply service taxable under reverse charge; under Rule 2(g) of the Service Tax Rules, 1994 and Notification No. 30/2012-ST, the service tax liability lay on the recipient, not the proprietary supplier, and the demand was unsustainable. The value of that reverse-charge service was excluded while computing the supplier's aggregate turnover for small service provider exemption, so the exemption remained available and the second work order demand also failed. A demand based only on Form 26AS and ST-3 mismatches, without independent corroboration of suppression or wilful misstatement, could not invoke the extended period; that demand was held time-barred.

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Issues: (i) Whether the first work order for manpower supply attracted service tax liability on the appellant or on the service recipient under reverse charge; (ii) whether the second work order was eligible for small service provider exemption while computing the aggregate taxable value; (iii) whether the demand based on Form 26AS and ST-3 differences could be sustained by invoking the extended period of limitation.

Issue (i): Whether the first work order for manpower supply attracted service tax liability on the appellant or on the service recipient under reverse charge.

Analysis: The work order and invoices showed that the appellant supplied manpower under the control and supervision of the recipient, and the appellant was a proprietary concern. The transaction was therefore manpower supply service. Under the reverse charge arrangement applicable to such service, read with Rule 2(g) of the Service Tax Rules, 1994 and Notification No. 30/2012-ST dated 20.06.2012, the tax liability rested on the recipient and not on the appellant.

Conclusion: The demand of service tax on this work order was unsustainable and was set aside in favour of the assessee.

Issue (ii): Whether the second work order was eligible for small service provider exemption while computing the aggregate taxable value.

Analysis: The first year of operation was taken into account, and the initial taxable turnover was within the exemption threshold. The value relatable to services on which tax was payable by the recipient under reverse charge was not to be included for the appellant's threshold computation. On that basis, the threshold benefit remained available.

Conclusion: The demand under the second work order was not sustainable and was set aside in favour of the assessee.

Issue (iii): Whether the demand based on Form 26AS and ST-3 differences could be sustained by invoking the extended period of limitation.

Analysis: The demand was founded on Form 26AS and return data without independent corroboration of suppression or wilful misstatement. Regular filing of ST-3 returns and the absence of independent investigation or corroborative evidence meant that mere data mismatch could not justify the extended period. The Tribunal treated the demand as time-barred on the facts of the case.

Conclusion: The invocation of the extended period failed, and the impugned demand was also set aside on limitation.

Final Conclusion: The appeal succeeded in full, the confirmed demand did not survive on merits or limitation, and consequential relief was left open according to law.

Ratio Decidendi: Mere mismatch between Form 26AS and ST-3 data, without independent corroborative evidence of taxable service or suppression, does not justify service tax demand under the extended period; and where manpower supply is taxable under reverse charge, the liability lies on the recipient, not the individual supplier.

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