Whether statutory payments like ESI includible in taxable value of service?

PJ/CASE LAW/2015-16/2758

Case:-MANPASAND MANPOWER P. LTD. VERSUS COMMISSIONER OF S.T., KOLKATA

Citation:- 2014 (33) S.T.R. 94 (Tri. - Kolkata)

Brief Facts:-Briefly stated facts of the case are that the appellant are engaged in providing services of ‘cleaning’ & ‘manpower recruitment and supply agency’, falling under Section 65(24b) and Section 65(68) of the Finance Act, 1994, respectively. The appellants are registered for providing such services w.e.f. 29-11-2006. During the course of audit, it had been pointed out by the visiting audit team that the total receipt of gross taxable value against aforesaid services, as per Bank Statement, were Rs. 12,25,19,007/-, for the year 2008-2009, whereas the value shown in ST-3 Returns, were Rs. 11,79,96,434/-. Thus there was difference in the taxable value amounting to Rs. 45,22,643/-, on which Service Tax was not discharged by the appellant. On being pointed out, the appellant had immediately discharged the Service Tax of Rs. 5,58,999/- vide Challan No. 573, dated 23-4-2010. Subsequently, a show cause notice was issued to them proposing penalty under various provisions of the Finance Act, 1994. The adjudicating authority appropriated the amount already paid and imposed penalty of Rs. 5,000/- under Section 77 of the Finance Act, 1994 and equal amount of penalty under Section 78 of the Finance Act, 1994. Aggrieved by the said order, the appellant filed an appeal before the ld. Commissioner (Appeals), who has upheld the order by confirming penalty under Section 77 and Section 78 of the Finance Act, 1994. Hence, the present appeal.

Appellants Contention:-Ld. C.A., Ms. Shivani Shah, appearing for the appellant, has submitted that they have been providing services of ‘cleaning services’ and ‘manpower recruitment and supply agency’ service from 2006 onwards and discharging Service Tax meticulously. Further, she has submitted that various other charges were collected by them viz., employees contribution of EPF and labour contribution of ESI from the service receivers and the said statutory charges were not retained by them but ultimately paid to the respective statutory authority. She has contended that the said statutory charges were duly shown in the invoices raised by them in favour of the client, but no Service Tax was paid on it. The ld. C.A. has produced a sample Bill No. OS/08-09/May/115, dated 28-5-2008. It is her submission that the amount being statutory expenses and reimbursed to the appellants for making payment, on behalf of their clients, hence, the same were not included in the gross taxable value of the services rendered underbona fide belief that such charges were not to be included in the gross taxable value for payment of Service Tax. Accordingly, even though the amount was reflected in the respective invoices and also in the balance sheet, but no Service Tax was paid. She has categorically submitted that it was abona fide belief of non-inclusion of such statutory expenses in the taxable value and there has been no suppression nor any mis-statement of facts. The ld. C.A. has relied upon the Tribunal’s judgment in the case of Quadrant Communications Ltd. v. Commr. of Central Excise, Pune-III reported in 2012 (26)S.T.R.33 (Tri.-Mumbai)

Respondents Contention:-The ld. AR for the Department, reiterated the findings of the ld. Commissioner (Appeals). He has submitted that non-payment of Service Tax on the differential value, and non-reflection of the correct value received in the ST-3 Returns, amounts to suppression. Hence, penalty has been rightly imposed on them.

Reasoning Of Judgement:-Heard both sides and perused the records. The tribunal find that the appellants are engaged in providing ‘cleaning services’ and ‘manpower recruitment and supply agency services’, during the relevant period. A difference was found between the gross taxable value shown in the ST-3 Returns, vis-à-vis, Bank Statements of the Company. This discrepancy was noticed by the audit during the course of audit of their record. Accepting the said mistake, the appellants had deposited the amount of Service Tax and later paid the interest also. Tribunal agree with contention of the ld. C.A. that the discrepancy between the taxable value shown in the ST-3 Returns and the Bank statement was due to receipt of various statutory expenses like, employees contribution of EPF and labour contribution of ESI, which were duly reflected in the respective invoices, but not included in the gross taxable value in the services. The fact that the receipt has been disclosed in the invoices and the amounts were also shown in the invoices as well as in the Bank statements, itself indicate that the approach of the appellant have beenbona fide. In these circumstances, they do not find any merit in the order confirming imposition of penalty under Section 78 of the Finance Act, 1994. However, penalty under Section 77 has been rightly invoked and imposed. Consequently, the order of the ld. Commissioner (Appeals) confirming imposition of penalty under Section 78, is hereby set aside and the penalty under Section 77 is upheld.

Decision:- Appeal partly allowed.

Comment:- The crux of the case is that as the difference between the gross taxable value shown in ST-3 and the bank statement was due to statutory expenses reimbursed and paid to the respective authorities on which there was bonafide belief that no service tax was payable, benefit of section 80 of the Finance Act, 1994 was extended. Furthermore, on pointing out by the audit team, the assessee has deposited the service tax on difference value along with interest, and such difference in value was due to receipt of various statutory expenses like, employees contribution of EPF and labour contribution of ESI, which were duly reflected in the respective invoices, but not included in the gross taxable value in the services. Therefore, it depicts the bonafide intention of the assessee and hence the penalty imposed under section 78 was set aside.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2758

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