2025-VIL-1041-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax – Reimbursement of expenses for delayed commencement of joint venture operations - Manpower Recruitment or Supply Agency Service - Business Transfer Agreement, Reimbursement of Expenses – Appellant entered into a Business Transfer Agreement with SBPL to transfer their entire business pertaining to sale, manufacture and distribution of colour television sets - The JV was delayed due to reasons beyond appellant’s control. During this period, appellant incurred expenditure towards salary and rental charges and raised debit notes to SBPL towards rent facility and salary of employees – Demand of service tax treating the amount as consideration for 'Manpower Recruitment or Supply Agency Service' - Whether the amount received by the appellant constitutes consideration for 'Manpower Recruitment or Supply Agency Service' liable to service tax, or merely reimbursement of expenses incurred during the delayed commencement of joint venture operations – HELD - The consideration received was not towards 'Manpower Recruitment or Supply Agency Service' but only towards reimbursement of salary paid for retaining employees during the relevant period. The agreement between Appellant and SBPL was a complete contract for sale of property for new venture and cannot be vivisected into different categories to find service tax element on each activity – the appellant was not engaged in supply of manpower as its primary business but was undertaking other activities. The issue of reimbursable expenses is squarely covered by the Supreme Court judgment in the case of M/s Intercontinental Consultants and Technocrats Pvt. Ltd. – Further, deputation of staff to group companies and the salary given by the assesses would not amount to providing any services falling under the category of Manpower Supply - the demand for service tax under 'Manpower Recruitment or Supply Agency Service' is set aside and the appeal is allowed - Extended Period of Limitation - Suppression of Facts - Fraud and Collusion - Whether the extended period of limitation could be invoked in the absence of any suppression of facts, fraud or collusion when all transactions were duly recorded in books of account and subject to regular audit – HELD - No finding could be concluded that the appellant had committed fraud for evasion of service tax. The expression 'suppression' in the proviso to Section 11A must be construed strictly as it is accompanied by strong words like 'fraud' or 'collusion'. Mere omission to give correct information is not suppression unless it was deliberate to stop payment of duty. Suppression means failure to disclose full information with intent to evade payment of duty. When facts are known to both parties, omission by one party cannot render it suppression. The burden is on Revenue to prove suppression of facts when invoking extended period of limitation - The demand is held to be time-barred as there was no suppression of facts, fraud or collusion established by the Revenue.
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