Custom, Excise & Service Tax Tribunal
Sai Labour Contractor vs Commissioner Of Central Excise, ... on 10 October, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. ST/85532/13-Mum (Arising out of Order-in-Original No. 21/ST/Commr/2012 dated 29.11.2012 passed by Commissioner of Central Excise & Customs, Aurangabad) For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Sai Labour Contractor Appellant Vs. Commissioner of Central Excise, Aurangabad Respondent Appearance: Shri A.P. Kolte, Advocate, for appellant Shri V.K. Agarwal, Additional Commissioner (AR), for respondent CORAM: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) Date of Hearing: 10.10.2013 Date of Decision: 10.10.2013 ORDER NO Per: S.S. Kang Heard both sides.
2. The appellant filed this appeal against the order-in-original dated 29.11.2012 passed by the Commissioner of Central Excise and Service Tax, Aurangabad. The appellants undertook the activity of supply of manpower to various clients. The appellants are not disputing the liability of service tax in respect of supply of manpower. The appellants were paying service tax on the gross amount received from their clients except in the case where the manpower is supplied to textile mills and Maharashtra State Secondary School of Certificate Board, Aurangabad (SSC Board). In respect of the manpower supplied to textile mills and SSC Board, the appellants are only paying service tax on the portion of the service charges retained by the appellants, i.e. without taking into consideration the labour wages and other amount received from the textile mills and SSC Board. The dispute in the present appeal is in respect of the valuation of service provided to textile mills and SSC Board.
3. The contention of the appellants is that the appellants are liable to pay service tax only on the service part and not in respect of wages etc. The appellants relied upon the decision of the Honble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. UOI reported in 2013 (29) STR 9 (Del.), to submit that the Honble High Court held that the provisions of Rule 5(1) of the Service Tax Rules are held to be ultra vires, therefore the demand by including the wages etc. in the total value for the purpose of service tax is not sustainable.
4. The appellants also submitted that the demand is time barred as the show cause notice was issued on 14th September 2011 demand service tax for the period 2006-07 to 2009-10. The contention is that in the year 2007 the Revenue recorded the statement of the authorized representative of the appellants, whereby the facts were disclosed to the Revenue. In these circumstances, as the Revenue was aware that the appellants were paying service tax on the service portion only, in the year 2007. Therefore, the demand by issuing show cause notice on 14.9.2011 is time barred. The appellants also submitted that during the period in dispute, audit was conducted and vide letter dated 15.9.2008, the audit objection was conveyed to the appellants, therefore the Revenue was aware in respect of the factual position hence the allegation of suppression with intent to evade payment of tax is not sustainable, therefore the whole demand is time barred.
5. The appellants also argued that the demand is not rightly quantified. The contention is that for the year 2009-10, the appellants had not provided any manpower to the textile mills and SSC Board. However, the Revenue has confirmed the demand regarding which the appellants had already paid the tax on the gross amount.
6. The Revenue relied upon the findings of the lower authority and submitted that as the Honble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. (supra) held that the provisions of Rule 5(1) of the Service Tax Rules are ultra vires on the ground that the provisions are beyond the scope of Section 67 of the Finance Act, the contention is that as per the provisions of Section 67 of the Finance Act, the service provider is to pay service tax on the gross amount received in respect of the service provided. In the present case the appellants are providing taxable service by supplying manpower and the appellants are receiving gross amounts in respect of that service, therefore as per the provisions of Section 67 of the Finance Act, the appellants are liable to pay service tax on the gross amount received in respect of the service provided.
7. In respect of the time bar, the contention is that when the statement of the authorized representative was recorded, the authorized representative in reply to question No.5, disclosed that they were aware that service tax is payable on the gross amount received by them. Thereafter the service tax returns were scrutinized and the jurisdictional Revenue authorities directed the appellants to pay appropriate tax. During this period, the audit para was also conveyed to the appellants. The appellants requested to the textile mills for payment of service tax as demanded by the Revenue, which is evident from the letter dated 20.2.2008 and the appellants informed the jurisdictional Revenue authorities that the matter has been taken up with the textile mills. The Revenue also submitted that as the appellants are paying service tax on the gross amount received from the service recipient in respect of other clients, therefore it cannot be said that the appellants were not aware that the service tax is to be paid on gross amount hence there is a clear suppression on the part of the appellants with intent to evade tax.
8. In respect of quantification, the Revenue relied upon the written submission submitted at the time of personal hearing on 23.11.2012, where the appellants only argued in respect of quantification on the ground that the amount of TDS and other charges which were deducted by the textile mills are not to be taken into consideration while computing the gross amount for the purpose of service tax. The contention is that TDS is deducted by the service recipient. The appellants will get the refund of the amount while discharging the income tax liability hence it cannot be said that TDS is not part of the gross amount in respect of the service provided.
9. We find that in the present case the appellants are not disputing the fact that the appellants were providing taxable service of manpower supply. The appellants are providing service to various textile mills and to SSC Board and also to other private clients. In respect of the other private clients, the appellants are paying appropriate tax on the gross amount received. Only in respect of the service provided to SSC Board and textile mills, the appellants are discharging service tax on the service portion only. In these circumstances, we find no merit in the contention of the appellants that the allegation of suppression is not sustainable, particularly in view of the fact that the appellants were well aware of the fact that they are liable to discharge the liability of service tax on the gross amount and the appellants in some cases are doing so. In respect of the decision of the Honble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. (supra), the Honble High Court held that Rule 5(1) of the Service Tax Rules, which provides inclusion of expenditure or cost incurred by the service provider in the course of providing taxable service in the value for the purpose of charging service tax is ultra vires to that extent only, as held in para 18 of the judgment. In the present case, we find that Section 67 of the Finance Act provides that the assessee is liable to pay service tax on the gross amount received in respect of the service provided. In the present case, the service is of supply of manpower. The case before the Honble Delhi High Court was with reference to consulting engineer service and in that regard, the Honble High Court held that the expenditure such as travel cost, hotel stay, transportation are not to be included in the gross amount for the purpose of taxable service. In the present case there are no such expenses. The appellants are receiving the gross amount in respect of the labour supplied to the service recipient hence in view of the provisions of Section 67 of the Finance Act, the appellants are liable to pay service tax on the gross amount received.
10. In respect of quantification, we find that in the written submission filed at the time of personal hearing before the adjudicating authority, the appellants only pleaded that the TDS and other deductions made by the textile mills are not to be taken into consideration while calculating the liability of service tax on the gross amount. We find that in respect of TDS, the appellants are entitled for refund or adjustment of that amount at the time of payment of income tax, therefore it cannot be said that it is not part of the gross amount received by the appellants. In view of this, we find no merit in the appeal and the same is dismissed.
(Dictated in Court) (P.K. Jain) Member (Technical) (S.S. Kang) Vice President tvu 1 7