2014 (12) TMI 42 - AT - Service Tax

Classification of service - business auxiliary service or manpower supply service - harvesting and transportation of sugarcane from the farmers fields to the sugar factory - Held that - Tenor of the agreement is for the specific tasks of harvesting of sugarcane and transportation of the same from the farmers fields to the sugar factory . The agreement is not for supply of any manpower to the sugar factory. The consideration paid also has no nexus to the manpower employed. - As per Section 65(68) of Finance Act, 1994 manpower recruitment or supply agency means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise to any other person and the taxable service is defined under Section 65(105)(k) as service rendered to any person by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner . The appellants are not manpower recruitment agencies as they do not recruit any persons; they also do not supply manpower to the sugar factory. What they have undertaken is harvesting of sugarcane and transportation of the same to the sugar factory. To undertake this work, they have engaged labour/transport contractors who have undertaken the work of harvesting of sugarcane and transportation of the same. In any service activity, manpower is required. That does not make the service as supply of manpower. From the statutory definitions and the contracts entered into by the appellants, it is clear that there is no element of manpower supply or recruitment by the appellants to the sugar factory and therefore, the services rendered by the appellants cannot be classified under manpower recruitment or supply agency services, by any stretch of imagination. It is also worth noting that the appellants do not undertake this work for anybody else except for the sugar factory concerned. In other words, they do not supply manpower to any customer who approaches them. Therefore, the impugned demands by classifying the activity under manpower supply service are not sustainable in law. Following the decisions of this Tribunal in the cases of Amrit Sanjivni Sugarcane Transport Co. Pvt. Ltd. 2013 (8) TMI 58 - CESTAT MUMBAI , Samarth Sevabhavi Trust 2013 (8) TMI 218 - CESTAT MUMBAI and Bhogavati Janseva Trust & Others (2014 (9) TMI 482 - CESTAT MUMBAI) - Decided in favour of assessee.

Issues Involved:
1. Classification of services provided by the appellants as "manpower supply service" or "business auxiliary service".
2. Validity of service tax demands under the category of "manpower supply service".
3. Applicability of extended period of time for demands.
4. Classification of additional services provided by appellants.

Detailed Analysis:

1. Classification of Services:
The primary issue revolves around whether the activities undertaken by the appellants, specifically harvesting and transportation of sugarcane, should be classified under "manpower supply service" or "business auxiliary service" (BAS). The appellants argued that their agreements with sugar factories were for the harvesting and transportation of sugarcane, and not for the supply of manpower. The consideration was paid based on the tonnage of sugarcane supplied, indicating the nature of the service was not manpower supply. The Tribunal examined the contracts and found that the agreements were indeed for specific tasks like harvesting and transportation, and not for supplying manpower. The Tribunal concluded that the services rendered by the appellants do not come under the purview of "manpower recruitment or supply service".

2. Validity of Service Tax Demands:
The department issued demands for service tax under the "manpower supply service" category. The appellants contended that the demands were unsustainable as the activities did not involve the supply of manpower. The Tribunal supported this view, stating that the appellants did not recruit or supply manpower to the sugar factories. Instead, they engaged contractors for harvesting and transportation, and the consideration was based on the quantity of sugarcane delivered. The Tribunal emphasized that in any service activity, manpower is required, but that does not make the service a supply of manpower. Therefore, the impugned demands were deemed unsustainable.

3. Applicability of Extended Period of Time:
The appellants argued that the demands were time-barred as there was no suppression of facts. The Tribunal did not delve deeply into this issue as the appeals were allowed on merits. However, it was noted that the practice of harvesting and transportation through trusts/co-operative societies was well known to the department.

4. Classification of Additional Services:
In some appeals, appellants provided additional services such as feeding sugarcane into mills, cleaning parking yards, handling press mud, bailing bagasse, and other related activities. The Tribunal examined whether these activities could be classified under "manpower supply service". It was determined that these activities were paid for based on the quantity of material handled, not the manpower supplied. The Tribunal referenced previous decisions, including Ritesh Enterprises and others, where similar activities were not classified under "manpower supply service". Consequently, these additional services were also not considered as "manpower supply service".

Conclusion:
The Tribunal concluded that the services rendered by the appellants, including harvesting and transportation of sugarcane, and additional related activities, do not fall under "manpower recruitment or supply service". Instead, these activities are more appropriately classified under "business auxiliary service". As a result, the service tax demands under the "manpower supply service" category were found to be unsustainable. The appeals filed by the Revenue were dismissed, and those filed by the appellant-assessees were allowed, with consequential relief in accordance with law.

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