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Kelly Services India Pvt. Ltd. Versus C.C.E., & S.T., Gurgaon-II

2015 (10) TMI 2228 - CESTAT NEW DELHI

Disallowance of CENVAT credit on medical insurance services and demand of interest alleging delay in payment of service tax on transactions with Associated Enterprises prior to 10.5.2008 – Manpower Recruitment – Appellant contends that it had to obtain insurance cover for employees who are provided temporarily to customers and they qualify as input services and they have rightly availed credit and has paid interest upon the delayed payment after 10.5.2008 upto the date of payment. - Held Tha .....

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associated enterprises, immediately upon amendment, has been introduced only w.e.f. 10.5.08. Prior to 10.5.08, neither the Finance Act, 1994 not the Service Tax Rules, 1994 contain any provision enabling demand of service tax prior to the realization of taxable services, in any circumstances. This being so, it is not legally permissible to give retrospective effect to the Explanation inserted in Rule 6 of the Service Tax Rules. - Decision in the case of CESTAT in Sify Technologies Ltd. Vs. CCE .....

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an, Advocate For the Respondent : Shri M.R. Sharma, AR ORDER Per Sulekha Beevi C.S. 1. The above appeal raises two issues for consideration (i) disallowance of Cenvat credit on medical insurance services (ii) demand of interest alleging delay in payment of service tax on transaction s with Associated Enterprises prior to 10.5.2008. 2. The appellant is engaged in providing services of manpower recruitment and are registered for various services. They are also availing Cenvat credit. It was observ .....

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verseas affiliate and made entries in the books of account. Service tax pertaining to these book entries was paid by appellant in January 2009. Department entertained the view that as per amendment brought forth by the Explanation to gross amount charged w.e.f. 10.5.2008, the appellant is liable to pay service tax on the due date reckoned as per date of making the book adjustments and that when service tax was paid by appellant in 2009 pertaining to book entries made in 2006-07, 2007-08, there i .....

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77; 1000/- under Section 77 of the Finance Act, 1994. In appeal, the same was upheld by the Commissioner (Appeals). Aggrieved, the appellant is before the tribunal. 3. The disputed period with regard to the denial of Cenvat credit on medical insurance services is prior to 1.4.2011 when the definition of input services included activities relating to business. The appellant received insurance services for providing insurance cover to its employees. The learned Counsel submitted that appellant was .....

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e judgment in Commissioner of Service Tax, Bangalore Vs. M/s Team Lease Services (P) Ltd. 2014-TIOL-510-HC-KAR-ST. 4. The credit is seen denied in the impugned order observing that medical insurance service has no direct nexus with the output services. In a catena of decisions it has been held that, the definition of input service, as it stood during the relevant period (prior to 1.4.2011) covered every conceivable service used in the business of the assessee. The judgment of the Hon'ble Hig .....

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ing as amount payable for the consideration yet to be paid for these services. The actual payment for services received was made by appellant in 2011. The service tax for these services were paid in January 2009. According to the department the amendment brought forth w.e.f. 10.5.2008 clarified that gross value charged included book adjustments made and that therefore appellants are liable to pay service tax after due date on making the book entries till the payment of tax i.e; January 2009. For .....

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debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. Explanation inserted in Rule 6(1) of Service Tax Rules is as below: Explanation For the removal or doubts, it is hereby declared that where the transaction of taxable service is with any associated ente .....

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rding to the appellant, they have deposited ₹ 2,94,277/- as interest applicable for the book adjustments which actually is excess payment, as the actual liability of interest for the admitted period would be only 266,695/-. The department is claiming payment of interest of ₹ 3,25,360/- for delayed payment. As per the Order-in-Original the book entries of the Financial Year 2006-07 and 2007-08 are considered to have been made on 10.5.2008 and the adjudicating authority has held that t .....

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ich is perfectly in accordance with the provisions contained in Rule 6(1) of the Rules ibid. The department has not proposed to demand service tax from various dated in 2006-07 to 2007-08 itself when the book entries were made in the books of accounts of the assessee. I find that since the provisions have been clarified on 10.05.2008, the department has treated the entries made by them in 2006-07 to 2007-08 as having been made on 10.5.2008 and since the assessee is a person other than individual .....

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o be paid at the time of receipt /making of payment of consideration or as advances, before rendering of services. Section 68 of the Finance Act read with Rule 6 of the Service Tax Rules provide for the manner of payment. The gross value has to be determined in terms of Section 67 of the Finance Act, 1994. The appellant received the taxable services in 2006-07 to 2007-08 and made book entries in their account then. But the service tax was paid only in January 2009. 8. The department is of the vi .....

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id thrust on the judgment of CESTAT in Sify Technologies Ltd. Vs. CCE reported in 2011-TIOL-123-CESTAT-Mad. While deciding similar issue, the Tribunal held as follows: The statutory provision for demanding service tax in respect of transactions between associated enterprises, immediately upon amendment, has been introduced only w.e.f. 10.5.08. Prior to 10.5.08, neither the Finance Act, 1994 not the Service Tax Rules, 1994 contain any provision enabling demand of service tax prior to the realizat .....

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ing provision. It is not, nor can it be, anybody s case, that Explanation shall always take effect retrospectively. In the case of Commissioner of Customs Vs. Skycell Communications Ltd. (2008-TIOL-1898-CESTAT-MAD-LB), [2008 (232) ELT 434], the Larger Bench of the Tribunal has held that Explanation placing restrictions prejudicial to the assessee will not be retrospective In the instant case also, Notification No. 19/08 introducing Explanation to Rule 6 of the Service Tax Rules, 1994 contains a .....

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