2015 (3) TMI 43 - AT - Service Tax

Classification of service - manpower recruitment or supply agency service - activity of providing harvesting sugar cane and transporting the harvested sugar cane from the farmers fields to the factory site - Held that - As per the provisions of Section 65(68) Manpower Recruitment or Supply Agency service means any person providing any service, directly or indirectly, in any manner, for the recruitment or supply of manpower, temporarily or otherwise to any person and as per Section 65(105)(k) taxable service means any service provided or to be provided 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 . Service brought under the tax net under the Manpower Recruitment or Supply Agency Service envisages supply of labour per se. In the instant case, we notice that there is no supply of labour per se to the sugar factory. The work undertaken is harvesting of sugar cane and transporting the same to the sugar factory for which labour is employed. The sugar cane belongs to the sugar factory in terms of the agreement of sale executed between the farmer and the sugar factory. Therefore, the activity undertaken by the appellant is one of procuring or processing of the goods belonging to the client which is classifiable under Business Auxiliary Service and not under Manpower Recruitment of Supply Agency Service . On the supervision charges paid to the appellant for the said activity, they have already discharged service tax liability under Business Auxiliary service . - No merit in the impugned order classifying the service under the category of Manpower Recruitment or Supply Agency service . Accordingly we set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
Classification of service under 'manpower recruitment or supply agency service' for harvesting and transportation of sugar cane. Bar on limitation for the period covered by the show cause notice.

Analysis:

Issue 1: Classification of service under 'manpower recruitment or supply agency service'
The appellant, a private limited company facilitating harvesting and transportation of sugar cane, contested the service tax demand by arguing that their activity does not fall under 'manpower recruitment or supply agency service.' They highlighted agreements with farmers and the sugar factory, emphasizing that they act as facilitators and not labor suppliers. The appellant paid service tax under 'Business Auxiliary Service' for coordination services. The Revenue argued that the appellant supplied labor for sugar cane harvesting and transport, supporting the classification under 'manpower recruitment or supply agency service.' The Tribunal examined agreements and concluded that the appellant's role was that of a facilitator, coordinating between farmers and the sugar factory. Payments were made on a tonnage basis, not based on the number of laborers, indicating a service related to goods procurement, falling under 'Business Auxiliary Service.' The Tribunal set aside the order classifying the service under 'manpower recruitment or supply agency service,' ruling in favor of the appellant.

Issue 2: Bar on limitation for the period covered by the show cause notice
The appellant contended that a portion of the period covered by the show cause notice was barred by limitation due to the absence of suppression or withholding of information. However, the Tribunal did not delve into this issue as the primary focus was on the classification of services. Therefore, the Tribunal did not provide a specific ruling on the limitation aspect.

In conclusion, the Tribunal allowed the appeal, setting aside the order classifying the service under 'manpower recruitment or supply agency service.' The detailed analysis of agreements and payment structures supported the finding that the appellant's role was that of a facilitator in the harvesting and transportation process, not a labor supplier. The issue of limitation was not extensively addressed in the judgment.