2013 (10) TMI 821 - AT - Service Tax

Manpower Recruitment Agency u/s 65(105)(k) - Sharing of expenses / cost between two companies - Whether the appellant would fall under the definition of Manpower Recruitment and Supply Agency - Held that - Following M/s. Paramount Communication Ltd. Vs. Commissioner of Central Excise, Jaipur 2013 (3) TMI 38 - CESTAT NEW DELHI - service tax liability is on a commercial concern engaged in providing any service, which is recruitment or the supply of man power - the appellant is a composite textile mill and is not a commercial concern it engaged in primarily in recruitment or supply of man power. The service is by the personnel to the two companies in question and not one company providing service to the other company - So there is no taxable activity on the part of the appellant to the other to be taxed under manpower supply service taxable as 65(105)(k) and therefore, the stay petition as well as appeals are allowed - The fact that payment to employee is made by one company and there is inter-company payment of the share of the cost of the employees utilised by the other company cannot be interpreted to mean one company was providing service to the other order set aside Decided in favour of Assessee.

Summary

Issues:
1. Whether the appellant is liable to be taxed under the category of Manpower supply or recruitment Agency.

Analysis:
The case involved an appeal against an order demanding service tax from the appellant under the category of Manpower Recruitment Agency. The appellant was observed to have collected amounts from subsidiary companies for supplying qualified/skilled employees. The definition of 'Manpower Recruitment Agency' under Section 65(105)(k) of the Finance Act, 1994 was crucial in determining the tax liability. The adjudicating authority confirmed the demands, imposed penalties, and the appellant appealed the decision. The First Appellate Authority upheld the tax liability, leading to the present appeal.

The appellant argued that they were not a supplier of Manpower Recruitment or engaged in the supply of manpower, emphasizing that they were a composite mill. They contended that the employees deputed to group companies were not exclusively under the group companies' control and completed directed work before returning to the appellant. The departmental representative, however, asserted that the appellant supplied skilled manpower to group companies and charged amounts for their services.

Upon considering the submissions and perusing the records, the Tribunal analyzed the definition of Manpower Recruitment and Supply Agency. The definition required a commercial concern engaged in providing services for recruitment or supply of manpower to be liable for service tax. The Tribunal noted that the appellant was primarily a composite textile mill and not a commercial concern engaged in the recruitment or supply of manpower. Referring to a previous decision, the Tribunal emphasized that sharing employees between sister concerns did not constitute the supply of manpower from one company to another.

Given the similarity of the issue with the precedent case, the Tribunal found the impugned order unsustainable and set it aside, allowing the appeal. The decision highlighted that the appellant's activities did not fall within the taxable category of Manpower supply service, as defined under the relevant law. The judgment concluded by setting aside the impugned order and allowing the appeal, thereby relieving the appellant from the tax liability imposed.

In summary, the Tribunal's detailed analysis focused on interpreting the definition of Manpower Recruitment Agency in relation to the appellant's activities, ultimately determining that the appellant was not liable to be taxed under the category of Manpower supply or recruitment Agency based on the specific facts and legal provisions involved in the case.