The Hyderabad bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the demand, ruling that Hyderabad Municipal Corporation (GHMC) was not liable to pay Service Tax on Manpower Supply Services and Cab Rent Services under the Reverse Charge Mechanism (RCM).
The appellant – Greater Hyderabad Municipal Corporation (GHMC) was a Local Authority i.e. a Civic Body for the city of Hyderabad, constituted under the authority of GHMC Act, 1955, passed by Andhra Pradesh State Legislature.
demand an amount of Rs. 30,71,27,798/- as service tax under reverse charge on taxable services viz. “Manpower Recruitment or Supply Agency Service” received by the appellant in terms of the proviso to Section 73(1) of Finance Act, 1994 w.e.f. 01.07.2012 read with Notification No. 30/2012- ST dated 20.06.2012.
GHMC was collecting service charges on Cell Tower verification Service in the name of permit fee and charges towards verification/clearance/ permission services provided by them to various applicants i.e. Telecom Operators. The said process of granting permission/clearance falls under Business Support Services under Section 65 (104c) of the Finance Act, 1994 up to 30-06-2012 and under taxable service in the Negative List Regime.
GHMC has not produced invoices or copies of agreements to prove that service tax is not collected separately or the gross amounts charged is inclusive of service tax and has not produced evidence supporting their contention that no service tax had been collected on this count.
Mr. T Satya Murthy, representing the appellant has argued that the appellant is neither a business entity nor a body corporate nor registered as a body corporate. Hence, the liability under Reverse Charge Mechanism, in terms of the Notification No. 30/2012-ST dated 20.06.2012, in respect of Manpower Supply services & Rent a cab Service, is not attracted. Consequently the demand of Rs.30,71,27,798/-on Manpower Supply services and the demand of Rs.1,49,02,365/-on Rent a cab Service is not legally sustainable.
The bench found that the original authority has not given any finding in the impugned order whether the appellant is ordinarily a business entity, in terms of Section 65B (17) of the Finance Act 1994 or a body corporate in terms of Section 65 (14) of the Finance Act 1994 read with Clause (7) of Section 2 of the Companies Act, 1956,but simply held that GHMC being service recipient/Body Corporate is liable to discharge service tax liability in terms of Serial No. 8 of Notification No. 30/2012-ST dated 20.06.2012, as amended with effect from 01.07.2012 onwards.
Further held that the appellant was neither a business entity nor a body corporate. Consequently, the appellant is not liable to pay service tax on Manpower Supply services and Rent a Cab service, under Reverse Charge in terms of Notification No. 30/2012-ST dated 20.06.2012. Accordingly, allow this ground in favour of the appellant and set aside the demand of Rs Rs.30,71,27,798/- on Manpower Supply services and Rs.1,49,02,365/- on Rent a Cab service under Reverse Charge, in terms of Notification No. 30/2012-ST dated 20.06.2012.
Accordingly, the two member bench of the tribunal comprising Anil Choudhary ( Judicial member) and A.K Jyotishi ( Technical member) allowed this ground in favour of the appellant and set aside the demand of Rs.15,18,18,931/-8. Consequently, CESTAT held that appropriation of Rs.7, 98, 52,484/- paid by the appellant during investigation was not legally sustainable and accordingly set aside the same.
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