Service Tax Payable On Manpower Supply To Government Hospitals: CESTAT Delhi Upholds ₹64.61 Lakh Demand

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld a service tax demand of Rs 64,61,530 against a firm supplying manpower to Government hospitals.

The tribunal held that the appellant was not eligible for the benefit of the reverse charge mechanism under a 2012 notification, as the service recipients were not “business entities registered as a body corporate.”

A coram of Judicial Member Dr. Rachna Gupta and Technical Member Hemambika R. Priya dismissed the appeal and upheld the impugned order confirming the demand along with interest and penalty.

Shri Balaji Enterprises, a proprietorship concern, was engaged in providing manpower recruitment and supply services, including supplying nursing and orderly staff to Government hospitals and medical institutions.

A show cause notice dated April 20, 2015 was issued. The demand pertains to the period 2013–14.

Before the tribunal, the appellant submitted that the services provided were cleaning and housekeeping services forming part of public health and sanitation. It claimed exemption under Notification No. 25/2012-ST. It also sought the benefit of reverse charge under Notification No. 30/2012-ST. The appellant further argued that the issue involved interpretation of law and that penalty was not imposable.

The tribunal rejected these submissions. It noted that the classification of the services under manpower recruitment and supply agency service had not been disputed before the adjudicating authority.

The tribunal held that a ground not taken at the original stage cannot be raised at the appellate stage.

On reverse charge, the Tribunal held:

“In the instant case, we note that the benefit of Reverse Charge mechanism under Notification No. 30/2012-ST in respect of supply of Manpower Services is guided by a rider as given under Part I(A)(v) of the same Notification. The benefit of the said Notification is available only in case the service recipient is a business entity registered as a Body Corporate.”

The tribunal examined the service recipients and held:

“It is evident that the service recipients were Government Hospitals or Charitable Organizations. The said service recipients do not fall under the category of "business entity registered as a body corporate” which is essential for being eligible for abatement @ 25% under Notification No. 30/2012-ST (supra). Hence, we hold that the appellant was not eligible to avail the benefit of exemption as provided in the said Notification 30/2012, ibid.”

The tribunal also rejected the appellant's contention that the services were classifiable as cleaning services, noting that this contention could not be accepted in view of the findings in the impugned order.

The tribunal found no infirmity in the impugned order. It also dismissed the miscellaneous application seeking to place additional agreements on record.

For Appellant: Advocate Salil Arora

For Respondent: Jaya Kumari, Authorised Representative