Placement Services To MNCs By Educational Trust Liable To Service Tax Under 'Manpower Recruitment Services': CESTAT

P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) was addressing the issue of whether the recruiting facility to MNCs and other recruiting organisations by the assessee is liable to service tax under the category of 'Manpower Recruitment or Supply Agency Service'.

The institute being a trust has nothing to do with the service rendered by the assessee of recruitment by collecting the amounts from the respective students continues to be a commercial concern, hence, the demand is sustained, observed the Tribunal.

In this case, the assessee/appellants are rendering taxable services under the category of 'Management Consultancy Services' and also various academic courses.

The assessee was engaged in accommodating Multinational Companies (MNCs) and other recruitment agencies to conduct campus selection of candidates, for which different amounts were collected per successful candidates once the placement of service was confirmed.

Since this activity was covered under 'Manpower Recruitment or Supply Agency Services' in terms of Section 65(68) of the Finance Act 1994 read with Section 65(105k) of the Finance Act 1994, hence, the notice was issued demanding service tax for the relevant period.

The Commissioner (Appeals) in the impugned order held that the services were rightly classifiable under 'Manpower Recruitment or Supply Agency Services', since the word 'commercial concern' had nothing to do with the organization being a Trust. Hence, whether a concern is a commercial or a trust is irrelevant for the purpose of classification.

The assessee submitted that there is no 'consideration' charged by the assessee inasmuch as the recruiting companies made voluntary contribution in the nature of donation and no 'participating fee' was charged by the assessee and the entire contribution was credited to the corpus fund; hence, the question of levy of service tax on such consideration is not sustainable.

The department submitted that the assessee being is a trust cannot be a reason for not paying service tax, since the institution themselves have a tie-up agreement with the recruiting companies for the placement cells, according to which, the recruiting companies have to pay upfront amount of Rs.25,000/- per student for domestic operations or placements and to pay upfront amount of 1000 U.S. dollars per student for letting hire its students for overseas assignments.

The Tribunal noted that the claim of the assessee is that they are not a commercial concern. This aspect cannot be accepted in view of the fact that each student has been asked to pay Rs.25,000/- and US $ 1000 respectively, for the domestic recruitments and international assignments.

In view of this, the assessee being a trust cannot in any way rule-out the profit motive for having received these payments and there is nothing on record to show that these are voluntary donations. Accordingly, the liability to pay service tax needs to be sustained, added the bench.

The Tribunal stated that no grounds have been brought on record to prove intention to evade payment except to state that the facts were not brought on record in their ST-3 returns and was known to the Revenue only after the audit was conducted cannot be sustained, since Revenue got to know the facts in 2007 and issued notice only in 2009; therefore, the demands are set aside on limitation.

In view of the above, the Tribunal allowed the appeal.

Case Title: M/s. T.A. Pai Management Institute v. The Commissioner of Central Excise and Service Tax

Case Number: Service Tax Appeal No. 2374 of 2011

Counsel for Appellant/ Assessee: N. Anand

Counsel for Respondent/ Department: Rajesh Shastry

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