Manpower Supply under Reverse Charge: CESTAT Allahabad Sets Aside Service Tax Demand on M/s Pankaj Dua & Associates
Background of the Dispute
The matter in Pankaj Dua & Associates Vs Commissioner came before the CESTAT Allahabad against an Order-In-Appeal dated 25.11.2022 issued by the Commissioner, CGST (Appeals), Meerut. The core controversy was whether service tax was payable by the assessee, a manpower supply agency, or by its corporate clients under the reverse charge mechanism prescribed in Notification No. 30/2012-ST as amended.
Revenue initiated proceedings solely on the strength of information obtained from the Income Tax Department (Form 26AS) pertaining to Financial Years 2015-16 and 2016-17, which showed that the assessee had received professional/contractual payments but had neither discharged service tax nor filed corresponding service tax returns.
Based on this third-party data, a service tax demand of Rs. 4,37,162/- was raised and later confirmed by the adjudicating authority. The Commissioner (Appeals) affirmed this demand. The assessee approached the Tribunal challenging both the legal basis of the demand and the manner of fact-finding by the Department.
Facts in Brief
Nature of Registration and Activities
- The assessee was registered with the Service Tax Department.
- It was engaged in the business of providing manpower on a contractual basis to corporate entities and other bodies.
- For the relevant years, the assessee claimed that its services fell squarely within the category of manpower supply services, for which liability to pay service tax shifted to the service recipient under the reverse charge mechanism.
Information Triggering the Proceedings
Using Form 26AS data for 2015-16 and 2016-17, the Department noticed that the assessee had allegedly received:
- Rs. 13,60,000/- in FY 2015-16
- Rs. 15,99,749/- in FY 2016-17
No corresponding service tax payment or return filing under the service tax law was traced for these periods.
Relying entirely on this data, a Show Cause Notice dated 24.05.2021 was issued, proposing to:
- Demand service tax of Rs. 4,37,162/-
- Confirm interest and penalty (as per the provisions invoked in the notice)
The Deputy Commissioner of CGST, Ghaziabad, through an Order-In-Original dated 06.01.2022, upheld the proposal in the notice. This order was sustained by the Commissioner (Appeals) in the impugned Order-In-Appeal dated 25.11.2022.
Assessee’s Stand before the Tribunal
Claim of Being a Manpower Supply Agency
Counsel for the assessee argued that the firm operated as a “Manpower Supply Agency”, primarily engaged in supplying manpower to corporate clients. Specifically, in the relevant years, manpower services were stated to have been provided to:
M/s NAVAIR International Private Limitedin FY 2015-16M/s Ecom Express Limitedin FY 2016-17
Reliance on Reverse Charge Mechanism
The assessee relied on:
Notification No. 30/2012-ST dated 20.06.2012- As amended by
Notification No. 07/2015-ST dated 01.03.2015
Under these notifications, manpower recruitment or supply services provided to a body corporate are partly or wholly taxable on a reverse charge basis, placing the onus of tax payment upon the service recipient, not the provider.
The assessee consistently contended that:
- The clients were body corporates;
- The engagement was purely for manpower supply;
- Accordingly, any service tax due was legally payable by the recipient under reverse charge.
The counsel also submitted that supporting agreements, invoices and documents were either already filed or available, at least in respect of M/s NAVAIR International Private Limited.
Grievance against the Commissioner (Appeals)
The assessee highlighted that: