2019 (2) TMI 493 - AT - Service Tax

Manpower supply services - deduction of cost incurred towards labour charges payable - Held that - The factory supplied man power to the farmers based on their request. So also, in para-11 of the notice, it is mentioned that supply of Cane Harvest labourers by the factory is done only in cases where the farmers make a specific request for the same - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellants were engaged in the supply of manpower and required to register with the department under that category.
2. Whether the appellants were liable to discharge tax liability as a service provider.
3. Whether the impugned order confirming tax demand, interest, and penalties imposed under various provisions of law is sustainable.

Analysis:
1. The appeal involved a case where the appellants, who were manufacturers of sugar molasses, rectified spirit, and denatured spirit, were alleged to be supplying manpower to farmers registered with them. The department contended that the appellants were engaged in the supply of manpower and should have registered under that category, which they failed to do. A show-cause notice was issued proposing a demand of a specific amount for a certain period, along with interest and penalties. The Commissioner confirmed the tax demand, interest, and penalties in the impugned order dated 26.08.2011, leading to the filing of the appeal.

2. During the hearing, the appellant's counsel referred to a decision by CESTAT Chennai in a similar case, emphasizing that the facts of the present matter were akin to the case cited. The counsel argued that the sugarcane farmers had merely requested the appellants to arrange labor for sugarcane cutting, and the appellants deducted the labor charges from the farmers' payments. The counsel also relied on various case laws to support their argument. On the contrary, the Revenue supported the impugned order.

3. After hearing both sides, the Tribunal found merit in the appellant's argument, noting that the issue was covered by the earlier decision cited by the counsel. The Tribunal observed that the factory supplied manpower to farmers based on specific requests, as mentioned in the show-cause notice. Relying on the precedent and the facts presented, the Tribunal concluded that the impugned order could not be sustained. Therefore, the Tribunal set aside the impugned order, allowed the appeal, and granted any consequential benefits as per the law.

In conclusion, the Tribunal held in favor of the appellant, ruling that they were not liable to register as a manpower supplier and discharge tax liability as a service provider based on the specific circumstances of the case and the precedent cited during the proceedings.