Larsen & Toubro Ltd vs Commissioner Of Service Tax

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI

COURT No. I

Appeal No. ST/405/10

(Arising out of Order-in-Appeal No. YDB/259/M-II/2010 dated 26.05.2010 passed by Commissioner of Central Excise (Appeals), Mumbai II)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical)

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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 : No 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?

Larsen & Toubro Ltd.

Appellant Vs.

Commissioner of Service Tax, Mumbai II Respondent

Appearance:

Shri Prasad Paranjape, Advocate for appellant Shri A.B. Kulgod, Asst. Commissioner (AR) for respondent

CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. Raju, Member (Technical)

Date of Hearing: 16.07.2015 Date of Decision: 16.07.2015

ORDER NO

Per: M.V. Ravindran

This appeal is directed against Order-in-Appeal No. YDB/259/M-II/2010 dated 26.05.2010.

2. The relevant facts arise for consideration are that the appellant herein filed an application for refund of an amount of Rs.19,21,770/- on the ground that they have wrongly paid the service tax liability under the category of Business Support Service. The main reason for filing the refund application was that they were under mis-understanding of law paid the service tax on an amount which was collected by them from their sister concern for deputing manpower from their own office in Mumbai. Adjudicating authority issued a show-cause notice directing appellant to show cause as to why the refund claim should not be rejected as they have correctly discharged the service tax liability. In reply to the show-cause notice appellant contested the issue on merits. Adjudicating authority in the adjudication order accepts the contention of the appellant that service tax liability is not payable under Business Support Services but should be under Management Consultancy Services. After coming to such conclusion the refund claim was rejected. Aggrieved by such order-in-original appellant preferred an appeal before the first appellate authority. The first appellate authority agrees with the contention of the appellant that the service rendered by them would fall under the Management Consultancy Service but upheld the rejection of the refund claim on the ground that this service would fall under the category of Manpower Recruitment and Supply Agency Service.

3. Learned Counsel would draw our attention to the contradictions in order-in-original and the Order-in-Appeal. He would also submit that as regards the service rendered by the appellant for deputing manpower from Mumbai office to Bangalore office it would not fall under the category of Manpower Recruitment or Supply Agency Service as settled by the Honble High Court of Gujarat in the case of Commr of Service Tax vs. Arvind Mills Ltd.  2014 (35) STR 496 Guj. He would submit that as to the order of the adjudicating authority that the service rendered would fall under the category of Management Consultancy Service, this Tribunal in the case of Daurala Sugar Works - 2014 (33) STR 409 and Daurala Organics - 2009 (14) STR 620 (Tri. Del) had held that deputation of employees to sister concern would not fall under the category of Management Consultancy Service. It is his submission that going by the Judgement, the amounts paid by appellant as service tax under any of the category is not liable to be kept by the Government.

4. Learned D.R. reiterated the findings of the lower authorities.

5. On consideration of the detailed submissions made by both sides and on perusal of the records, we find that the issue lies in a small and narrow compass, inasmuch as whether the amount paid by the appellant as service tax payable on the amounts received from the sister concern for deputation of employees is correct or otherwise.

6. It is undisputed that the appellant has deputed their own employees to their sister concern and based on accounting entries of recovery of cost of such employees, under mis-understanding of law paid the service tax liability under Business Support Service. The adjudicating authority as well as the first appellate authority have held that the service tax liability does not arise under Business Support Service and Revenue has not filed any appeal against such order. As regards the findings of the adjudicating authority that the service tax payable would be under the category of Management Consultancy Service, the same has been rejected by the first appellate authority. Be that as it may, we find that this Tribunal in the case of Sugar Daurala Sugar Works (supra) Daurala Organics (supra) have categorically held that deputation of employees to their own sister concern would not fall under the category of Management Consultancy Service.

7. Now we address to the findings of first appellate authority wherein he held that the service rendered by the appellant is correctly covered under the category of Manpower Recruitment and Supply Agency Service. First and foremost, we find that this classification was not sought to be made by the show-cause notice nor by the adjudicating authority, secondly, assessee could not have addressed himself the classification of the services, unless the first appellate authority has issued a show-cause notice to the appellant to that effect. From the records it transpires that the first appellate authority has not issued show-cause notice to the appellant for reclassification of the service to the Manpower Recruitment or Supply Agency Service. On this legal issue itself, the impugned order is liable to be set aside. Be that as it may we find that the issue on the similar facts was agitated before the Tribunal in the case of Arvind Mills vs. Commissioner of Service Tax - 2014 (34) STR 610 (Tri.  Ahmd) wherein the Tribunal held that deputation of employees to their own sister concern and recovering cost from them, would not amount to rendering of Manpower Recruitment or Supply Agency Service. The said view has been upheld by the Honble High Court as reported in 2014 (35) STR 496. Since this view has already been upheld by the Honble Gujarat High Court, we find that the said ratio is binding on us as there is no other contrary judgement produced before us.

8. Accordingly, we hold that the service tax paid by the appellant is not liable to be taxed under any category of the services as has been sought to be done so by the lower authorities. Accordingly, the application for refund claim needs to be allowed.

9. We set aside the impugned order and allow the appeal with consequential relief.

(Dictated in Court)

(Raju) Member (Technical) (M.V. Ravindran) Member (Judicial)

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