2017 (7) TMI 762 - AT - Service Tax

Classification of service - Manpower Recruitment or Supply Agency service - the appellant as per the contract with M/s. Kalyani Lemmerz Ltd., providing the job of producing or processing in the premise of Kalyani. The terms of the job is on per piece basis - whether the service provided by the appellant to Kalyani is of Manpower Recruitment or Supply Agency service or otherwise? - Held that - though the department has proposed the service of the appellant as classifiable under Manpower Recruitment or Supply Agency service but no evidence was adduced to conclusively hold that the service is of Manpower Recruitment or Supply Agency service. The figure of the service tax was retrieved from the bank account which does not show what is the basis of the service charge by the appellant to the service recipient. Therefore, we do not find any material evidence in the show-cause notice to hold that the appellant are providing Manpower Recruitment or Supply Agency service. From the reading of the agreement and Annexure A it can be seen that the service is the production ancillary associates and rates for the service is on per piece rate of the pieces produced. Therefore the appellant s job is not to depute the labour to the service recipient, irrespective of the number of labours, the respondent has to perform the job of producing piece for the service recipient and the rate is on per piece basis. Therefore, the wages/ salary or emolument paid to the labour is not relevant to the service recipient. That is the responsibility of the appellant. Against this evidence the department right from show-cause notice up to the Commissioner (Appeals) could not bring any material to show that there is arrangement between the appellants and service recipient there is arrangement of supply of manpower. Since the department could not establish that the service provided by the appellant are of supply of manpower, the demand on the said service is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of service provided by the appellant as Manpower Recruitment or Supply Agency service for service tax liability.

Analysis:
1. The appellant entered into a contract with a company for producing or processing goods on a per-piece basis. The department alleged the service to be Manpower Recruitment or Supply Agency service, leading to a demand for service tax.
2. The appellant argued that the service provided was for production or processing, not for supplying manpower, as the job was based on per piece of goods and not on reimbursement of wages or salary. Reference was made to a tribunal decision with a similar contract, where the service was not classified as Manpower Recruitment or Supply Agency service.
3. The revenue contended that the agreement submitted lacked credibility, emphasizing the nature of work as labor supply based on the agreement's terms. Reliance was placed on a Board circular for classification under Manpower Recruitment or Supply Agency service.
4. The Tribunal noted the lack of conclusive evidence in the show-cause notice to classify the service as Manpower Recruitment or Supply Agency service. The agreement submitted by the appellant detailed the nature of work as production, not labor supply. The Tribunal referenced a similar case with the same service recipient, where the service was not classified as manpower supply.
5. Based on the evidence presented, the Tribunal found that the service provided by the appellant was for production, not supply of manpower. As the department failed to establish the service as manpower supply, the demand for service tax was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeals.

This detailed analysis covers the classification issue of the service provided by the appellant, highlighting the arguments presented by both sides and the Tribunal's reasoning behind the decision to set aside the demand for service tax.