By TIOL News Service

MUMBAI, APRIL 04, 2017: ON verification of records, it was noticed by the department that the appellants have, in some cases, collected service tax from their clients but had not deposited the same to the exchequer. It was also noticed that appellants were providing manpower to M/s. Kalyani Lemmerz Ltd.(KLL), M/s. Caparo Engineering, M/s Tata DLT International and Bosch Chassis.

SCNs came to be issued and the adjudicating authority confirmed the demands with interest and equivalent penalties.

The appellants submitted that they have discharged the service tax liability and interest in respect of services provided to M/s Caparo Engineering, M/s Tata DLT International and M/s. Bosch Chasis and seek leniency on the amount of penalties imposed.

Insofar as the services provided to M/s KLL, it is submitted that the agreement entered by appellant is for processing of goods in the premises of the said KLL and is not ‘manpower recruitment or supply agency services'; that they were paid on per piece basis and, therefore, does not partake the character of ‘Manpower recruitment or supply agency services'. Reliance is placed in support on the decisions in Divya Enterprises - 2009-TIOL-2476-CESTAT-BANG, Ritesh Enterprises - 2010-TIOL-539-CESTAT-BANG and Future Focus Infotech India (P) Ltd. - 2010-TIOL-835-CESTAT-MAD.

The AR justified the demand and imposition of penalties and interest.

The Bench observed -

+ Since the appellants are not contesting the service tax liability of the services rendered to these three companies, we find that the service tax liability, interest thereof needs to be upheld and we do so. Since these service tax liability were not discharged by the appellants, despite being registered with the authorities, we uphold the penalties imposed by the adjudicating authority on the amounts of service tax liability for the services rendered to these three entities.

+ On perusal of the agreement entered by the appellants with KLL, we find that the said agreement specifically indicates about the consideration to be paid to the appellants based upon the number of units produced in the factory premises of KLL and there is no restriction as to the specific number of employees to be brought for such purposes ; and work force employed by the appellant was on the roll of the appellant only and is supervised by the appellant. In our considered view this contract cannot be considered as a contract for supply of manpower to KLL.

The appeals were disposed of.

(See 2017-TIOL-1113-CESTAT-MUM)