2013 (9) TMI 951 - AT - Service Tax

Nature of services - Routing payments from farmers to labourer and maintaining database of labourers - stay - Manpower Supply or Recruitment Agency Service u/s 65(105)(k) - Whether the assistance so provided was covered under the definition of Manpower Supply or Recruitment Agency Service under Section 65(105)(k) of the Finance Act, 1994 read with Section 65(68) of the Act - Revenue was of the view that the applicant was providing service under the category - Held that - Prima facie it appeared that no taxable service was rendered because having a database of labourers or routing of the labourers or payments for the labourers may not be sufficient to make the assesse a manpower supply agency and also for the reason that for a service to be taxable at least there should be some part of the value of service retained by the service provider. - stay granted.

Summary

Issues:
Interpretation of "Manpower Supply or Recruitment Agency Service" under Section 65(105)(k) of the Finance Act, 1994 read with Section 65(68) of the Act.

Analysis:
The dispute revolved around whether the applicant's assistance in providing laborers for cutting sugar cane falls under the definition of "Manpower Supply or Recruitment Agency Service." The Revenue contended that the applicant was providing such a service, leading to a demand for service tax. The applicant argued that the laborers were not their employees, and they merely acted as intermediaries to mobilize a gang of laborers for cane cutting. They clarified that there was no employer-employee relationship, and they did not make any profit from the activity related to manpower supply.

The Revenue asserted that the applicant exercised control over the laborers by empanelling them, assigning codes, maintaining a database, and fixing payment terms. They highlighted that the applicant retained an amount from the laborers' payments and emphasized that the definition of a manpower supply agency covers any entity engaged directly or indirectly in supplying manpower. The absence of an employer-employee relationship was deemed irrelevant to the definition of the service.

The Tribunal considered both arguments and observed that the applicant, a sugar factory, did not fit the ordinary meaning of a "manpower recruitment or supply agency." While acknowledging the coordination in providing laborers and routing payments, the Tribunal found no evidence of the applicant profiting from the activity. The Tribunal noted that having a database of laborers or facilitating payments might not be sufficient to classify the applicant as a manpower supply agency. They also distinguished previous tribunal decisions involving entities solely in the business of supplying manpower, not sugar factories like the applicant.

Based on their analysis, the Tribunal concluded that categorizing the applicant's activity as a "manpower supply agency" was far-fetched. They granted a waiver of pre-deposit of the dues and stayed the recovery until the appeal's disposal. The Tribunal also directed the Registry to consolidate the appeal with other related cases for final hearing.