2017 (5) TMI 1086 - AT - Service Tax

Manpower recruitment or supply agency services - deemed consideration - tripartite agreement - Held that - identical issue came up before this Bench in the case of Raje Vijaysingh Dafale SSK Ltd. 2015 (3) TMI 874 - CESTAT MUMBAI , where it was held that 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 - demand not justified - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of service tax liability in a tripartite agreement involving multiple parties and consideration received for services provided.

Analysis:
The appeal was filed by Revenue against an order-in-original dated 12.09.2012, where the adjudicating authority concluded that no service tax liability arose on the respondent due to the absence of consideration received as per the clauses of the agreement. The respondent's factory, which was in debt to a Co-operative Bank, had a tripartite agreement with the bank and other sugar factories. Under this agreement, the sugar factories utilizing the respondent's factory were required to pay salaries/wages and other statutory contributions directly to the employees/workers. The Revenue contended that the amount paid by the sugar factories to the employees should be considered as deemed consideration received by the respondent, leading to service tax liability under 'manpower recruitment or supply agency services'. However, the adjudicating authority held that since the respondent did not receive any consideration for providing employees to other sugar factories, the tax liability was zero, resulting in dropping the demand for tax, interest, and penalties.

The Revenue argued that the adjudicating authority erred in not considering the amount paid by the sugar factories to the employees as deemed consideration received by the respondent, leading to the erroneous dropping of the proceedings initiated in the show-cause notice. The Tribunal noted similar cases where the issue was addressed, specifically citing the case of Raje Vijaysingh Dafale SSK Ltd. The Tribunal found the facts and circumstances of the present case to be identical to the case of Raje Vijaysingh Dafale SSK Ltd., where it was held that the appellant did not provide any service by way of manpower supply to the lessee as the salaries/wages were paid directly to the employees/workers without the appellant receiving any consideration for services rendered. Therefore, the Tribunal upheld the impugned order, stating that it was correct, legal, and did not suffer from any infirmity.

In conclusion, the Tribunal upheld the impugned order, rejecting the appeal filed by Revenue. The decision was based on the interpretation of service tax liability in the context of a tripartite agreement where the consideration received for services provided played a crucial role in determining the tax liability. The Tribunal's decision was supported by previous cases with similar factual backgrounds, emphasizing the importance of considering the direct receipt of consideration by the service provider in such scenarios to establish tax liability.