LLPs are not covered under the definition of 'body corporate' not liable to pay service

The Customs, Excise & Service tax Appellate Tribunal (CESTAT) ruled that a Limited Liability Partnership (LLP) is not considered a 'body corporate' for the purposes of paying service tax under the reverse charge mechanism. This decision means LLPs are not liable to pay service tax in such situations. Consequently, SRL Advisors LLP was deemed entitled to a refund of service tax paid erroneously.

In the matter of SRL Advisors LLP v. Commissioner of Central Tax, Delhi [Service Tax Appeal No. 51221 of 2018-SM and Final Order No. 51688 of 2021 decided on July 28, 2021], SRL Advisors LLP ('the Appellant') was incorporated as a limited liability partnership/entity ('LLP') under the Limited Liability Partnership Act, 2008 ('the LLP Act') and registered under the Service tax laws. The Appellant was rendering services including manpower services up to March 31, 2013. For rendering the manpower supply services, the Appellant also received manpower supply services from V. Search HR Consultancy Services, a partnership firm up to February 28, 2013. Thereafter, the Appellant engaged their own employees.

The Appellant filed refund application dated December 02, 2013, online and manually on December 13, 2013, for refund of erroneous payment of service tax amounting to Rs. 2,23,913/-.

The Appellant contended that, being an LLP is not covered in definition of ‘body corporate’ and hence not liable to pay service tax under reverse charge mechanism ('RCM'), as applicable to a body corporate in terms of Notification No. 30/2012-ST dated June, 2012.

The Customs, Excise & Service tax Appellate Tribunal, New Delhi ('CESTAT') analyzed that, Rule 2(bc) of Service Tax Rules, refers to the meaning of ‘body corporate’ in Section 2(7) of the Companies Act, 1956, wherein any other body corporate which includes an LLP is specifically excluded from the definition of body corporate.

The CESTAT held that, the Appellant as an LLP, is not required to pay service tax under the RCM during the period from January 04, 2013, to March 30, 2013. The Appellant is entitled to refund of the service tax paid erroneously under RCM, as per the refund application. 

Directed the Revenue Department, to grant refund within a period of 45 days from the date of receipt of a copy of order with interest for the period starting after three months from the date of refund application till the date of grant of refund.