Artefact Infrastructure Ltd vs Commissioner Of Central Excise, Nagpur

[Arising out of Order-in-Appeal No. ST/244/NGP/2009 dated 26/10/2009 passed by the Commissioner (Appeals), Central Excise & Customs, Nagpur]

For approval and signature:

Honble Mr. P.S. Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

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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? =======================================================

Artefact Infrastructure Ltd. : Appellant

VS

Commissioner of Central Excise, Nagpur : Respondent

Appearance

Shri R.G. Seth, Advocate for the Appellant Shri V.K. Kaushik, A.C, (AR) for the Respondent

CORAM:

Honble Mr. P.S. Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 19/10/2015 Date of decision: / /2015

ORDER NO.

Per : Ramesh Nair

The appeal is directed against Order-in-Appeal No. ST/244/NGP/2009 dated 26/10/2009 passed by the Commissioner (Appeals), Central Excise & Customs, Nagpur, wherein the Ld. Commissioner upheld the Order-in-Original No. 137/2009/STC dated 28/01/2009 and rejected the appeal of the appellant.

2. The fact of the case is that the appellant is engaged in providing services of consultancy and supervision of manpower; however they have not discharged the service tax of the said services. A show cause notice was issued wherein it was alleged that the services of consultancy and supervision falls under the head of Management Consultant Service accordingly the demand of Service Tax of Rs. 89,538/- for the period 2002-03 and 2003-04 was proposed and penalty & interest were also proposed. In the adjudication the adjudicating authority vide order No. 137/2009/STC dated 28/01/2009 held that the service of management and supervision is classified under Management Consultant Service and accordingly confirmed the demand of Service Tax amounting to Rs. 89,538/- in addition the penalty of double of the amount of Service Tax i.e. Rs. 1,79,076/- was imposed under Section 78 of the Finance Act, 1994. The penalty of Rs. 2000/- was also imposed under Section 77 of the Finance Act, 1994 for not furnishing their ST-3 return within stipulated time. Aggrieved by the Original Order the appellant filed the appeal before the Commissioner (Appeals) who upheld the said Original Order by passing an impugned order. Aggrieved by the said impugned order the appellant is before us.

3. Shri R. G. Seth, Ld. Counsel for the appellant submits that their activities are confined to supply the manpower and supervision thereof, hence the same is not covered under the definition of Management Consultant Service. He submits that at the most, the services are covered under supply of manpower which was included under the head of Manpower Recruitment Agency with effect of 16-6-2005, therefore the services are not taxable during the relevant period i.e. 2002-03 and 2003-04. He invited our attention to the invoices raised for their services which show the description as supervision of manpower, accordingly it falls under supply of manpower and therefore cannot be taxable under Management Consultant Service. He also submits that the demand is time bar in as much as show cause notice was issued on 30/7/2007 for the period 2002-03 and 2003-04. He submits that their entire transactions were recorded in their books of accounts. The appellant was of bonafide belief that their services do not fall under Management Consultant Service, but it may fall under supply of manpower which is not taxable. For this reason, there is no suppression of the fact on part of the appellant. The demand is time bar. As regard penalty, it is his submission that the penalty, at the relevant time prescribed under Section 78, was ranging from equal amount of Service Tax but not exceeding twice the amount of the Service Tax. The Adjudicating Authority and Commissioner (Appeals) imposed and upheld the maximum penalty i.e. twice the amount of Service Tax. It is his submission that in absence of malafide on the part of the appellant even the equal amount of the penalty under Section 78 is not sustainable. However, in any case, in the facts and circumstances of the case the penalty imposed equal to twice the amount of Service Tax is not proper. He further submits that the appellant before awaiting the adjudication, paid the amount of Service Tax alongwith interest. For this reason also penalty cannot be imposed.

4. On the other hand Shri V.K. Kaushik, Ld. Asstt. Commissioner (AR) appearing on behalf of the Respondent reiterates the findings of the impugned order.

5. We have carefully considered the submissions made by both the sides.

6. For the services provided by the appellant to their client which is the group company of appellant, they entered into a Memorandum of Understanding, which is reproduced below:

Memorandum of Understanding This Memorandum of Understanding is made on 1st April, 2002, at Nagpur BETWEEN M/s. Artefact Projects Limited, Registered under the Indian Companies Act, 1956, having its Registered office at 1st Floor, Bhiwapurkar Chambers, Opp. Yeshwant Stadium, Dhantoli, Nagpur-440012 represented by through its Director/Authorized Signatory (hereinafter referred to as Party No. 1) which expression shall unless repugnant to the context or meaning thereof include its administrators, successors and assigns of the First Part.

AND M/s. Artefact Software and Finance Limited, Registered under the Indian Companies Act, 1956, having its Registered office at 1st Floor, Bhiwapurkar Chambers, Opp. Yeshwant Stadium, Dhantoli, Nagpur-440012 represented by through its Director/Authorized Signatory (hereinafter referred to as Party No. 2) which expression shall unless repugnant to the context or meaning thereof include its administrators, successors and assigns of the Second Part.

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Whereas Party No. 1 and Party No. 2 are group companies.

Whereas Party No. 1 engaged in providing technical manpower supervises them for target oriented & outputs and performance for various Infrastructure Projects, Development and Construction of Roads.

Whereas Party No. 2 is leading organization for the business of acting as advisors and consultants for Infrastructure Projects being Technical Project Management Consultants and providing advisory services.

Whereas Party No. 2 has approached the Party No. 1 for its requirement of qualified and skilled professional for its staff augmentations purposes from time to time and Party No. 1 agreed to provide technical manpower for fulfilling its manpower requirement under the following terms and conditions.

1. Party No. 1 shall provide and supervise expert manpower required of professional personnels at various sites for further rendering of services for various Infrastructure projects of Party No. 2.

2. Party No. 2 shall issue a requirement sheet to the Party No. 1 giving details like job description of the candidates to be hired, the qualification of the candidates, the salary range.

3. Party No. 1 shall coordinate all interviews of candidates in coordination with recruiters of Party No. 2 and selected candidates shall be placed and deputed at various sites for further rendering of services for various Infrastructure projects of Party No. 2.

4. Party No. 1 shall supervise the manpower and shall charge 2% to 3% supervision charges as per project requirements.

5. Party No. 2 undertakes the utilization of facilities of Manpower and shall submit bills to the Party No. 2 for payment, before the end of every quarter.

From the above MOU, it is seen that the appellant is engaged primarily recruitment of the manpower and supervision thereof to the service recipient. The combined services on recruitment and supervision of the staff are, in our view falls under the Management Consultant Service. From the payment terms also it appears that the charges are for supervision of the manpower which shows that the Appellants service is supervision of manpower.

7. In view of this nature of services, we find that the service clearly falls under Management Consultant Service. We do not agree with the Ld. Counsels submission that this service falls under supply of manpower which became taxable with effect of 16-5005 for the reason that under the supply of manpower, the manpower agency supply manpower temporarily and they charge to their client on the basis of salary and wages of manpower. In the present case, first manpower is recruited, thereafter supervision of the said manpower is carried out by the appellant. Therefore, the services of the appellant that is requirement of staff and continuous supervision, thereof, in our view falls under Management Consultant Service. Further from the bills issued by the appellant to their client the description of services is Supervision Charges of Manpower. This fact also shows that the appellant is providing services of supervision of manpower and supervision of manpower does not fall under supply of manpower. We are therefore of consider view that the service provided by the appellant falls under the definition of Management Consultant Service, therefore it is indeed taxable.

8. As regard the issue of limitation, we observed that the appellant have not disclosed the facts related to their activities of services to their client before the department. They have not declared the taxable value in their ST-3 returns. In these circumstances, the department had no occasion to know the activity of the appellant, therefore, in our view, there is suppression of fact on the part of the appellant. As regard submission of the appellant on the imposition of the penalty under Section 78, we find that the provision of Section 78 at the relevant time provides the quantum of penalty that is not less than the amount of service tax and should not exceed the amount, twice of service tax. We find that the lower authorities have confirmed the maximum amount of penalty i.e. twice of tax amount under Section 78.

9. Considering the overall facts and circumstances of the case, we are view of that the penalty of equal amount of service tax is sufficient. Therefore, we reduce the penalty under Section 78 from Rs. 1,79,076/- to Rs. 89,538/-. However, penalty of Rs. 2000/- imposed under Section 77 is maintained. The demand of service tax and interest thereon and payment thereof already made by the appellant is upheld. The impugned order is modified and the appeal is partly allowed in above terms.

(Order pronounced in court on )

P.S. Pruthi Member (Technical) Ramesh Nair Member (Judicial)

saifi

8 Appeal No. ST/52/10-Mum