Custom, Excise & Service Tax Tribunal
Hitech Manpower Consultant Private ... vs Commissioner Of Gst&Amp;Cce(Chennai ... on 29 April, 2019
1
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
Regional Bench - Court No. III
Service Tax Appeal No. 41931 of 2013
(Arising out of Order-in-Original No. 20/2012/CH-IV/ST dated 04.10.2012 passed by
the Commissioner of Central Excise, Chennai-IV Commissionerate, M.H.U. Complex,
Nandanam, Chennai - 600 035)
M/s. Hitech Manpower Consultant Pvt. Ltd., : Appellant
Ali Towers, II Floor,
No. 55, Greams Road,
Chennai - 600 006
VERSUS
The Commissioner of G.S.T. & Central Excise : Respondent
Chennai Outer Commissionerate, Newry Towers, No. 2054/1, 2nd Avenue, 12th Main Road, Anna Nagar, Chennai - 600 040 APPEARANCE:
Shri. M. Mani Maran, Advocate for the Appellant Shri. B. Balamurugan, Authorized Representative for the Respondent CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. MADHU MOHAN DAMODHAR, MEMBER(TECHNICAL) FINAL ORDER NO. 40701 / 2019 DATE OF HEARING: 20.03.2019 DATE OF DECISION: 29.04.2019 PER BENCH :
Brief facts are that the appellants are engaged in the supply of manpower to M/s. ETA Engineering Ltd. They are registered under the said category of service.
2.1 During audit of accounts, it was noticed that the appellants had excluded the amount of salaries and wages paid to the persons from the taxable value while discharging the service tax for the period from June 2005 to September 2008. The Department was of the view that the said 2 amount is also includible in the total taxable value as per Section 67 of the Finance Act, 1994 read with Rule 3 of the Service Tax (Determination of Value) Rules, 2006.
2.2 A Show Cause Notice was issued proposing to demand service tax on such amounts such as salaries, wages, etc. After due process of law, the Original Authority confirmed the demand of Rs. 1,75,96,914/- along with interest and also imposed equal penalty under Section 78 of the Finance Act, 1994 along with separate penalty under Section 77 ibid. Aggrieved, the appellants have filed the present appeal.
3.1 On behalf of the appellant, Ld. Advocate Shri. M. Mani Maran submitted both oral and written arguments which can be summarized as under :
(i) The appellant was arranging manpower to its group companies, for which the appellant was paid service charges. The appellants raised two sets of invoices : one for the actual service provided by them for which service tax was paid and the other set of invoices, for the reimbursement of wages.
(ii) It is admitted that the appellant has paid service tax on the service charges received by them. The impugned Show Cause Notice seeks to recover service tax on the reimbursement of wages collected and paid to workers on behalf of the service receiver. The appellant being a manpower recruitment agency service provider, pays wages to the workers on behalf of the service receiver. The said wages are reimbursed by the service receiver namely, M/s. ETA Engineering Ltd.
The reimbursement so received from the service receiver is towards the actual cost of wages paid to the manpower. It is not the income of the appellant and the same is not part of the income as per the audited Profit and Loss account.
(iii) He relied upon the decision of the Hon'ble Apex Court in the case of Union of India Vs. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. reported in 2018 (10) G.S.T.L. 401 (S.C.) to argue that reimbursable expenses cannot be included in the total taxable value for the disputed period. The Hon'ble Apex Court, in the said judgement, has observed that Section 67 of the Finance Act, 1994, dealing with 'consideration', is suitably amended by the Finance Act, 2015 with effect from 14.05.2015 to include reimbursable expenses also. Thus, only from 14.05.2015, reimbursable expenses would form part of valuation for discharging 3 service tax. The period involved being from 2005-06 to 2008-09, the demand cannot sustain.
(iv) Ld. Counsel for the appellant also argued on the ground of limitation. It is submitted by him that the appellants have not suppressed any facts with intention to evade payment of service tax. They have reflected the amount received by them and also the wages paid to the workers in their accounts as well as the financial statements. In fact, the audit has raised the objection basing on the accounts maintained by the appellants. Thus, the allegation that the appellants have suppressed facts with intention to evade payment of service tax is factually wrong.
(v) The appellants discharged service tax on the service charges received by them. Separate invoices were issued showing the reimbursement of wages. The appellants were under the bona fide belief that the said reimbursement of wages is not to be included in the taxable value and therefore, have not discharged any service tax. The issue of reimbursable expenses was under litigation and had travelled up to the Hon'ble Apex Court and therefore, being interpretational in nature, the allegation that the appellants had not paid service tax with an intention to evade payment of service tax cannot sustain.
(vi) It is also argued by him that the whole issue is revenue neutral as the services provided to group companies of the appellant would be eligible for availment of CENVAT Credit on such service tax paid by them.
(vii) He relied on the following case laws :
(a) Commissioner Vs. M/s. Reliance Industries Ltd. - 2016 (339) E.L.T. A142 (S.C.)
(b) Commissioner Vs. M/s. Oboi Laboratories Pvt. Ltd. - 2015 (321) E.L.T. A210 (S.C.) 3.2 He therefore prayed to set aside the impugned order.
4.1 Ld. AR Shri. B. Balamurugan appearing on behalf of the respondent supported the findings in the impugned order. It is submitted by him that the appellants have received the amounts from the service recipient and as per Section 67 of the Finance Act, 1994, the gross amounts received by them have to be made the basis for discharging the service tax liability. The gross amounts charged by the appellants include service charges as well as wages. The appellant has deliberately not discharged service tax on the 4 wages part and therefore, is guilty of suppression of facts with an intention to evade payment of service tax.
4.2 To support his argument that wages and Provident Fund contribution are includible in the gross amount charged for payment of service tax, he relied upon the decision in the case of M/s. Neelav Jaiswal & Brothers Vs. Commissioner of C.Ex., Allahabad reported in 2014 (34) S.T.R. 225 (Tri. - Del.)
5. Heard both sides.
6. The issue is with regard to the non-payment of service tax on the salaries/wages received by them from their service recipients.
7. It is not in dispute that the appellants have discharged service tax on the service charges. The appellants contend that the said salaries/wages are reimbursable expenses. Ld. Counsel for the appellant has placed the samples of invoices raised by the appellants to the service recipients. It is clearly stated in such invoices that the amount is received towards the reimbursement of expenses, which is in the nature of wages, EPF and administration charges. Thus, the appellants are raising separate invoices for recovering the wages and EPF, which are paid to the manpower supplied by them.
8.1 Before we enter into the discussion as to whether the said amount would be includible in the total taxable value, we would like to address the issue of limitation. The period involved is from June 2005 to September 2008. The Show Cause Notice has been issued on 12.04.2010 invoking the extended period. In paragraph 8 of the impugned order, the Commissioner has discussed the issue of limitation. It is stated that the Show Cause Notice has been issued as it was noticed on the audit of accounts that the appellant had not discharged service tax with regard to the amount collected as salaries and wages. They have been invoicing the amount separately. Ld. Counsel for the appellant has placed the samples of the invoices raised by them as also the financial statements. The amount received as salaries and wages by the appellant is shown as expenditure and not as income by them. This goes to show that the appellants were under the bona fide belief that these are reimbursable expenses and would not be includible in the taxable value.
8.2 The issue whether reimbursable expenses are subject to levy of service tax was under litigation and had travelled up to the Hon'ble Apex 5 Court wherein it was settled by the decision in the case of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. (supra). The Department does not have a case that the appellants did not reflect the amount received by them in the nature of salaries/wages in their account. In fact, they have properly accounted the amounts received and also reflected the same in their financial statements. This being so, the allegation that the appellant has suppressed facts with an intention to evade payment of service tax is without any factual basis.
8.3 There is no positive act of suppression brought out by the Department to establish that the ingredients of Section 78 of the Finance Act, 1994 are attracted in the present case. Further, the issue whether reimbursable expenses are includable in the taxable value as also the issue whether salaries/wages/EPF are includible for the purpose of discharging service tax has been under litigation for a long time. The said issues are interpretational in nature. It is also brought out from the facts that the appellants were paying service tax under the said category after excluding these amounts. The amounts received as wages, EPF, etc., from the service recipient are not retained by the appellants.
9. On appreciation of all these facts, we are of the considered opinion that the Department has failed to establish that the appellants have wilfully suppressed facts with an intention to evade payment of service tax. The appeal therefore succeeds on the ground of limitation. We, therefore, do not consider it necessary to deal with the issue on merits.
10. The impugned order is set aside on the ground of limitation.
11. The appeal is allowed with consequential reliefs, if any, as per law.
(Order pronounced in the open court on 29.04.2019) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) (MADHU MOHAN DAMODHAR) MEMBER (TECHNICAL) Sdd