CESTAT sets aside Demand of Service Tax on both Manpower Recruitment and Supply Service and Renting Immovable property [Read Order]

The Hyderabad bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has set aside the demand for service tax on both manpower recruitment and supply service, as well as on renting immovable property.

The Appellant herein – M/s Bagga Distilleries Hyderabad Pvt Ltd was engaged in manufacture of Indian Made Foreign Liquor (IMFL) and are registered with the Service Tax authorities vide STR No.AACCB3837HSD002 for payment of Service tax under the categories of ‘Goods Transport Agency’ and ‘Business Auxiliary Service’. The appellant manufactures both for self and also on a job work basis – contract bottling.

 Mr. Venugopal,  submits that, the Appellant was  responsible for the manufacture/producing IMFL under the brands belonging to the CML in their own distillery, using their own manpower, skilled or unskilled required for the manufacture of IMFL The IMFL so manufactured/produced shall be sold to CML or to the buyers specified by CML. The Appellant is paid at an agreed price on a per case basis, of each category of the IMFL manufactured, as per clause 13(a) of the Manufacturing Agreement. The Commissioner in the impugned order has, thus erred to construe the manufacturing agreement as an agreement for manpower supply agreement.

The bench does not find merit in the impugned order to demand Service tax on the manufacturing services provided by the Appellant under ‘Manpower Recruitment and Supply service’ and accordingly, the demand under the same was  liable to be set aside.

Further the demand for the renting of immovable property during the period 2008-2009, we agree with the Appellant that during the relevant period, the issue was disputed before various High Courts and finally ended up before the Supreme Court. Finally, the issue was put to rest by way of a retrospective amendment. This, itself, shows that there was a lot of confusion on levy of tax on renting of immovable property service during the material period involved in this case. The normal period of limitation for the raising demand for non-payment of service tax as per Section 73 of the Finance Act during the impugned period is one year from the relevant date. The demand in this case is for the period from 01.04.2008 to 31.03.2009 and therefore the relevant date is the due date of filing of return i.e., 25.04.2009.

Accordingly, the normal period of limitation will expire on 25.04.2010 and the show cause notice came to be issued on 21.10.2011. Thus, the entire demand of tax for the period 01.04.2008 to 31.03.2009 was barred by limitation. Accordingly, set aside the demand of tax.

CESTAT set aside the impugned order and demand of tax on both ‘Manpower Recruitment and Supply Service’ and ‘Renting of Immovable Property Services’. All penalties are set aside.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates