LLPs not liable to pay Service Tax under Reverse Charge Mechanism: CESTAT [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a Limited Liability Partnership (LLP), being not a “Body Corporate” under section 2(7) Companies Act,2013, is not liable to pay service tax under the reverse charge mechanism (RCM).

The appellant was rendering services including manpower supply up to 31 March, 2013. For rendering the manpower supply service, they also received manpower supply services from V. Search HR Consultancy Services, a partnership firm up to 28 February, 2013. The Firm was aggrieved by an order of the department  have submitted inter alia, that they are incorporated as a limited liability partnership/entity under the LLP Act, 2008.

The department was of the view that the services rendered by the Firm is subject to Service Tax under the reverse charge mechanism.

It was contended by the appellant that they being an LLP are not covered in ‘body corporate’ and hence not liable to pay service tax under reverse charge, as applicable to a body corporate.

Judicial Member Anil Chaudhary found that Rule 2(bc) of Service Tax Rules, refers to the meaning of ‘body corporate’ in Section 2(7) of the Companies Act, wherein any other body corporate which includes a LLP is specifically excluded from the definition of body corporate.

“Thus I hold that the appellant as a LLP, is not required to pay service tax under the reverse charge mechanism during the period under dispute. Accordingly, the impugned order is set aside. It is held that the appellant is entitled to refund of the service tax paid erroneously under reverse charge, as per the refund application. Accordingly, the adjudicating authority is directed to grant refund within a period of 45 days from the date of receipt of a copy of this order with interest for the period starting after three months from the date of refund application till the date of grant of refund,” the Tribunal said.

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