By TIOL News Service

NEW DELHI, AUG 18, 2017: THE appellants are engaged in providing manpower supply & recruitment services to various commercial establishments. During the disputed period, the appellant had provided such service to M/s Hindustan National Glass and Industries Ltd. (HNGIL). The said service receiver had deposited amounts towards P.F, E.P.F and E.S.I contribution into the Central Government account in the capacity of principal employer in respect of the salaries paid to the workmen/employees deployed by the appellants.

The Department entertained the view that the amounts towards such statutory payments should be included in the gross value of the appellant and appropriate service tax liability has to be discharged.

Accordingly, demand notices were issued and confirmed by the lower authorities.

The appellant is before the CESTAT and submits that since the amount towards the statutory contributions were not received by the appellants, the same cannot be included in the gross value u/s 67 of the Finance Act, 1994 for levy of service tax thereon.

The appellant also raised the ground of the demands being hit by limitation. Reliance is placed on the decision in H.M. Singh and Co. - 2014-TIOL-1504-HC-ALL-ST to buttress their stand.

The AR supported the order of the lower authorities.

After considering the submissions, the CESTAT observed thus -

"6. The Employees Provident Fund & Miscellaneous Provisions Act, 1952 and the Employees State Insurance Act, 1948 created the liability upon the principal employer to contribute to the respective funds, an amount equal to employees contribution. Thus, in compliance of the said provisions, the service receiver M/s HNGIL had contributed to such funds, the amount towards the workmen deployed by the appellant. The fact is not under dispute that such contributed amount was never given by such service receiver to the appellant. Thus, the gross value for the computation of service tax liability in the hands of the appellant will not take into consideration the amount of contribution made by the service receiver M/s HNGIL directly into the respective heads of account. Therefore, in our considered view, service tax demand cannot be confirmed on the employer's contributed amount towards P.F., E.P.F. and E.S.I ."

In the matter of the plea made that the demand is hit by limitation, the Bench observed that since the issue involved relates to interpretation of statutory provisions, it could not be said that the appellants had indulged in fraud, collusion, suppression, misstatement etc. to defraud the Government Revenue.

The SCNs which were beyond the normal period were held to be clearly barred by limitation of time and the proceedings were set aside on this count also.

The appeals were allowed.

(See 2017-TIOL-2983-CESTAT-DEL)