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2015 (3) TMI 874 - AT - Service TaxDemand of service tax - manpower supply or recruitment service - M/s. Raje Vijay Singh Dafale SSK Ltd. (RVDSSK Ltd.), Sangli was a sugar factory and due to default in payment of loans, the said factory was taken over by M/s. Maharashtra State Co-operative Bank Ltd. who leased out the factory to M/s. Rajaram Bapu Patil SSK Ltd - Held that - The lessor is the bank and the lessee is M/s. Rajaram Bapu Patil SSK Ltd. The appellant is the borrower. As per the agreement, the lessor being a secured creditor had taken over the factory of the borrower under Section 13(2) of the SARFAESI Act, 2002 to recover its dues and has leased out the factory of the borrower to the lessee. As part of the agreement, the lessee has undertaken to continue the services of the persons who were on the muster rolls of the borrower as permanent employees and the lessee was required to pay salaries/wages to the employees directly. Therefore, it cannot be said that the appellant has provided any service by way of manpower supply to the lessee. In any case, the salaries/wages were paid directly to the employees/workers and the appellant has not received any consideration for any services rendered. Therefore, the question of demanding any service tax in the absence of a consideration will not arise at all. - Impugned order is set aside - Decided in favour of assessee.
Issues:
Service tax demand confirmation against the appellant, consideration for services rendered, legality of the impugned order. Analysis: The appeal before the Appellate Tribunal CESTAT Mumbai stemmed from an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune - II Commissionerate, confirming a service tax demand of Rs. 28,39,348 against the appellant, along with interest and penalties under Sections 70, 77, and 78 of the Finance Act, 1994. The appellant contested the order, arguing that they did not provide any 'manpower supply or recruitment service' as the factory in question was taken over by a bank and leased out to another entity, which directly paid the salaries and wages to the employees. The appellant claimed that without receiving any consideration for services rendered, the imposition of service tax was unjustified, and therefore, the impugned order should be set aside. Upon reviewing the submissions from both parties and examining the tripartite agreement dated 12/09/2006, the Tribunal noted that the bank, acting as a secured creditor under the SARFAESI Act, had taken over the factory of the appellant and leased it to another entity. The lessee was obligated to retain the existing employees as permanent staff and directly pay their salaries and wages. Given these circumstances, the Tribunal concluded that the appellant did not provide any service related to manpower supply to the lessee. Moreover, since the appellant did not receive any consideration for any services provided, the Tribunal determined that the demand for service tax was unwarranted. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. In summary, the Tribunal's decision hinged on the absence of consideration for services rendered by the appellant, the direct payment of salaries and wages to employees by the lessee, and the nature of the agreement between the parties involved. The Tribunal found that the appellant did not engage in providing manpower supply services and therefore, the imposition of service tax was deemed inappropriate, leading to the appeal being allowed and the impugned order being set aside.
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