2018 (9) TMI 1729 – CESTAT CHENNAI – TMI – Man Power Recruitment Agency and Supply Service – appellant have deputed the employees to their sister concern or units and collected deputation charges from the latter – Held that:- The scope of service tax liability in respect of the activity of staff to subsidiary / group companies is no longer res integra – The Hon’ble High Court in the case of CST Vs Arvind Mills Ltd. [2014 (4) TMI 132 – GUJARAT HIGH COURT], has held that subsidiary companies cannot be said to be client of holding company and the deputation of employees was only for and in the interest of the company; there is no relation of agency and client.
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Section 73 (3) of the Finance Act, 1994 – Held that:- In the present case, a SCN has very much been issued and the adjudication thereof has culminated in confirmation of the demand. At such a later stage, if the LAA finds that demand is time-barred, he should only set aside the demand on that ground but cannot advise assessee
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ation charges from them. Department took the view that service tax is required to be paid on such activity under MRSA, hence show cause notice dt. 28.05.2010 was issued inter alia, proposing demand of ₹ 20,42,314/- being service tax amount not discharged by the assessee during 2005-06 & 2006-07 with interest thereon, along with imposition of penalties under Section 76, 77 & 78 ibid. In adjudication, the original authority vide an order dt. 04.10.2010 however confirmed demand to the extent of ₹ 18,23,910/- with interest thereon imposed equal penalty under Section 78 of the Finance Act and also under Section 76 & 78 ibid. In appeal, Commissioner (Appeals) vide impugned order No.04/2012 dt. 23.01.2012 accepted the submission of the assessee that except one company namely Lapross Engineering Ltd., employees were deputed among group companies, salary was paid through book adjustment, hence there was no relationship of service provider and service recipient and hence
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ee in their Appeal ST/244/2012 have submitted that the impugned order is not clear; that while the Commissioner (Appeals) has allowed the appeal as time-barred, has however directed to settle the tax under Section 73 (3) of the Act. The department has filed Appeal ST/228/2012 against setting aside part of the demand and setting aside of penalty under MRSA service by the Commissioner (Appeals). 3. Today when the matter came up for hearing, on behalf of the assessee, Ld. Advocate Ms. Nancy made oral and written submissions which can be summarized as under : i) They have deputed the employees to their sister concern or units and collected deputation charges from the latter. Therefore, the services rendered by them do not fall under the category of Man Power Recruitment Agency and Supply service. ii) The assessee places reliance on the case of Commissioner of Service Tax Vs. Arvind Mills Ltd., reported in 2014 (35) S.T.R. 496 (Guj.), wherein it was held that deputation of employees to thei
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ding company and the deputation of employees was only for and in the interest of the company; there is no relation of agency and client. The relevant portion of the said judgment is reproduced as under : 5. It is true that in the present form, the definition of Manpower Supply Recruitment Agency is wide and would cover within its sweep range of activities provided therein. However, in the present case, such definition would not cover the activity of the respondent as rightly held by the Tribunal. To recall, the respondent in order to reduce his cost of manufacturing, deputed some of its staff to its subsidiaries or group companies for stipulated work or limited period. All throughout the control and supervision remained with the respondent. As pointed out by the respondent, company is not in the business of providing recruitment or supply of manpower. Actual cost incurred by the company in terms of salary, remuneration and perquisites is only reimbursed by the group companies. There is
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clude any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied. In the present case, facts are to the contrary. 6.2 Respectfully following the ratio already laid down, we hold that in respect of employees deputed by the assessee to their group companies we do not find any infirmity in the decision of the Commissioner (Appeals) setting aside the demand in respect of employees deputed by the assessee to the group companies. 6.3 In the event, no merit is found in respect of the grievance of the Department regarding setting aside by LAA of the demand under MRSA in respect of services provided by assessee to group companies. In any case, the disputed amount that was before the LAA is only to the tune of ₹ 18,23,910/- and hence department s appeal against such ord
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see by the department or by the assessee on their own accord. In such a situation, once the assessee pays up the tax liability with interest thereon, no further SCN is required to be issued. However, in the present case, a SCN has very much been issued and the adjudication thereof has culminated in confirmation of the demand. At such a later stage, if the LAA finds that demand is time-barred, he should only set aside the demand on that ground but cannot advise assessee concerned to discharge the disputed amount through Section 73 (3) ibid. While are not able to find any fault with the finding of Commissioner (Appeals) that the said demand is time-barred as the assessee had been audited on more than one occasion earlier, we set aside that portion of the order which opines that the disputed demand could be settled under Section 73 (3) ibid. So ordered. Impugned order to this extent is set aside and assessee s appeal ST/244/2012 is allowed with consequential benefits, if any, as per law.
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