2017 (1) TMI 171 - AT - Service Tax

Manpower Recruitment or Supply Agency - demand of tax on the gross value paid as services, salaries, allowances, dearness allowances, gratuity, wages, bonus, incentive and other statutory dues payable to the employees by other sugar manufacturer who used the respondent s facilities for manufacturing of sugar - Held that - the respondent herein did not receive any consideration from the users of manufacturing facility; Revenue has not contraverted this factual finding of the adjudicating authority. On this factual findings if the respondent did not receive any amount from any one, for the use of manufacturing facility as well as all the employees, question of taxing the services will not arise is the correct finding recorded by the adjudicating authority - impugned order upheld - appeal rejected - decided against Revenue-petitioner.

Summary

Issues:
Appeal against Order-in-Original regarding Service Tax liability on "Manpower Recruitment or Supply Agency" services.

Analysis:
The appeal was filed by the Revenue against Order-in-Original No. 17/ST/COMMR/KOP/2012 dated 09.10.2012 passed by the Commissioner of Central Excise & Service Tax, Kolhapur. Despite notice, no one appeared on behalf of the respondent. The case was taken up for disposal in 2013. The Departmental Representative was heard, and the records were examined. A show-cause notice was issued to the respondent demanding Service Tax for "Manpower Recruitment or Supply Agency" services. The notice claimed that the respondent needed to discharge the Service Tax liability on various payments made to employees by another sugar manufacturer using the respondent's facilities for manufacturing sugar.

Upon review of the records, it was found that the respondent's factory was taken over by the Sangli District Co Operative Bank Ltd. under the SARFAESI Act, 2002 due to outstanding dues. Subsequently, the bank entered agreements with other sugar factories for leasing the respondent's factory with the condition that the employees would not be terminated, and payments like salary, gratuity, provident fund, etc., would be made directly to the employees. The respondent did not receive any consideration from the users of the manufacturing facility, a fact not disputed by the Revenue. Based on these findings, the adjudicating authority correctly concluded that if the respondent did not receive any amount from anyone for the use of the facility and payment to employees, the question of taxing the services did not arise. The appellate tribunal found no reason to interfere with this reasoned order and upheld the impugned order, rejecting the appeal for lacking merits.