2017 (2) TMI 844 - AT - Service Tax

Harvesting and loading & unloading of the sugarcane at the sugar factory - whether amounts to rendering of services under the head manpower recruitment or supply agency service and is taxable or not? - Held that - the revenue authorities are not able to show that the appellant had supplied manpower to M/s Bhima Sahakari Sakhar Karkahana Ltd. We find that identical issue came up before the Tribunal in various matters and it has been held by the Tribunal that such activities does not fall under the category of manpower recruitment or supply agency service - appeal allowed - decided in favor of appellant.

Issues:
1. Service tax liability under the category of 'manpower recruitment or supply agency service' for the period 2005-06 to 2010-11.
2. Applicability of services rendered in harvesting and transportation of sugarcane to the sugar factory under 'manpower recruitment or supply agency service'.
3. Contesting the show-cause notice on merits and on limitation.
4. Confirmation of demand raised and imposition of penalties by the adjudicating authority.
5. Interpretation of agreements between the appellant and M/s Bhima Sahakari Sakhar Karkahana Ltd.

Issue 1: Service tax liability under 'manpower recruitment or supply agency service':
The appeal was against the demand for service tax liability under this category for the period 2005-06 to 2010-11. The Revenue alleged that the appellant's activities of harvesting and transportation of sugarcane to the sugar factory constituted rendering of services falling under this category. The adjudicating authority confirmed the demand and imposed penalties.

Issue 2: Applicability of services in harvesting and transportation of sugarcane:
The appellant's agreement with the sugar factory involved harvesting, loading, unloading, and transporting sugarcane from a specified area. The Revenue sought to classify this under 'manpower recruitment or supply agency service'. However, it was found that the appellant did not supply manpower to the sugar factory. Previous Tribunal decisions and a High Court judgment established that similar activities did not fall under this service category. The Tribunal held that the Revenue's classification was incorrect, and the impugned order was set aside.

Issue 3: Contesting the show-cause notice:
The appellant contested the show-cause notice both on merits and on limitation. The learned Counsel highlighted the subsequent agreement between the appellant and the sugar factory, emphasizing that the appellant's role was to assist farmers in harvesting operations. The appellant's submission was supported by a previous Tribunal decision, indicating that the services provided did not fall under 'manpower recruitment or supply agency service'.

Issue 4: Confirmation of demand and penalties:
The adjudicating authority confirmed the demand raised and imposed penalties after due process. However, the Tribunal, upon careful consideration of submissions and records, found that the Revenue's classification was incorrect based on established precedents. The Tribunal held that the impugned order was unsustainable and allowed the appeal, setting aside the impugned order.

Issue 5: Interpretation of agreements:
The Tribunal analyzed the agreements between the appellant and the sugar factory, focusing on the nature of services provided, including harvesting, loading, unloading, and transportation of sugarcane. The Tribunal's decision was influenced by previous Tribunal decisions and a High Court judgment, which clarified that such activities did not fall under the category of 'manpower recruitment or supply agency service'.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning in reaching its decision.

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