P. Padmavathi Vs Commissioner of Central Tax (CESTAT Hyderabad)
Summary: The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal considered whether wages paid by a manpower service provider to labourers and subsequently reimbursed by the client could be included in the taxable value of ‘Manpower Recruitment or Supply Agency Service’ (MRSAS), or whether service tax was payable only on the commission/service charges retained by the appellant.
The appellant, P. Padmavathi, had entered into an agreement with M/s Crown Beers India Ltd (CBIL) for supply of manpower. Separate invoices were raised towards wages payable to labourers and service charges/commission. The Department nevertheless demanded service tax on the entire amount, including wages, contending that the appellant did not qualify as a pure agent under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006.
The appellant submitted that wages were separately identified, reimbursed on actual basis and never retained as income. According to the appellant, only the commission represented consideration for the taxable service. The adjudicating authority and Commissioner (Appeals) rejected this contention on the basis that the conditions prescribed under Rule 5(2) were not fulfilled and consequently treated the entire amount as gross value of taxable service.
