Shanti Beem Friends Educated Unemployed Co-operative Society Ltd Vs Commissioner of Central Tax (CESTAT Hyderabad)
The CESTAT Hyderabad considered appeals filed by M/s Shanti Beem Friends Educated Unemployed Co-operative Society Ltd against orders of the Commissioner (Appeals) upholding orders-in-original confirming service tax demands along with interest and penalties. The appellant society was engaged in providing manpower supply services to M/s ONGC Ltd. The dispute principally concerned the valuation of taxable services under Section 67 of the Finance Act, 1994 and whether amounts relating to salaries, PF, ESI and other statutory payments could be excluded from the gross amount charged for manpower supply services.
The department had received information from ONGC that the appellant was supplying manpower to ONGC without discharging service tax liability under ‘Manpower Recruitment or Supply Agency Service’ (MRSAS), defined under Section 65(105)(k) of the Finance Act, 1994. The Rajahmundry Divisional Office advised the appellant to obtain service tax registration, but registration was not obtained. The appellant contended that, being a cooperative body, it was not a commercial concern and was therefore outside the service tax levy. It also approached the Hon’ble High Court of AP, which directed the department to pass an assessment order.
Before the Tribunal, the appellant did not dispute the manpower supply issue in isolation but challenged the fixation of taxable value. It submitted that the amounts received from ONGC substantially represented salaries and statutory payments such as ESI and PF, while the society retained only a nominal amount towards overheads and maintenance. The appellant relied upon decisions including MP Security Force Vs CCE & ST, Bhopal and the Supreme Court decision in Union of India Vs M/s Intercontinental Consultants and Technocrats Ltd., contending that only the service element should form part of the taxable value.
