The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) remanded the matter concerning the classification of services related to the supply and installation of computers and peripherals at customer premises back to the Commissioner (Appeals) due to the lack of a reasoned order.
System Tech Inc., the appellant agreed with Hewlett-Packard India Sales Pvt. Ltd. to provide services related to the supply, installation, and maintenance of computers and peripherals at customer premises.
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On 08.02.2007, the Department issued a show-cause notice (SCN) alleging that the services provided by the appellant fell under three taxable categories as defined in the Finance Act, 1994. One was Manpower Recruitment and Supply Agency Services, Business Auxiliary Services, and Maintenance and Repair Services.
The department issued a show cause notice stating that the appellant rendered services classified as “Manpower Recruitment and Supply Services” from 16.06.2005 to 31.03.2006 and “Business Auxiliary Services” from 09.07.2004 to 31.03.2006 making them liable for service tax under these provisions.
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The department demanded a service tax liability of Rs. 12,93,582. The appellant accepted the liability during the inquiry and paid the service tax amount along with an interest of Rs. 89,086. The department also imposed penalties stating that there was non-compliance in discharging the service tax liability.
Aggrieved by this decision, the appellant filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) upheld the adjudicating authority decision without providing detailed reasoning.
Aggrieved, the appellant challenged the Commissioner (Appeals) order before the CESTAT arguing that the services rendered were composite in nature and should not be artificially split into separate taxable services.
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The appellant’s counsel argued that the classification of services under “Manpower Recruitment and Supply” and “Business Auxiliary Services” was incorrect and arbitrary and Commissioner (Appeals) violated principles of natural justice by passing a non-reasoned and mechanical order.
The two-member bench comprising D.M Misra (Judicial Member) and R Bhagya Devi (Technical Member) observed that the Commissioner (Appeals) mechanically endorsed the findings of the adjudicating authority without providing a detailed examination or analysis of the issues raised by the appellant.
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The tribunal observed that the Commissioner (Appeals) did not adequately analyze whether the appellant’s services truly fell under the disputed categories, namely “Manpower Recruitment and Supply Agency Services” and “Business Auxiliary Services” as defined under the Finance Act, 1994. There was no discussion on how the definitions applied to the services rendered.
So, the tribunal remanded the matter back to the Commissioner (Appeals) for fresh adjudication and directed him to do a detailed and well-reasoned order. The appellant’s appeal was allowed by way of remand.
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