2019 (3) TMI 1185 - AT - Service Tax

Classification of services - manpower recruitment services or not - period 16.6.2005 to 31.3.2008 - Held that - It is evident that though appellant may have well used their own manpower for carrying out the services, the fact remains that the agreement is only to do Inspection of Greige Fabric and Inspection and Trimming / Fringe cutting of dipped belting chafer fabrics. They were also paid only as per the quantum per meter based on the quantum of the work done by them and not on man hours or based on the number of labourers supplied - the services carried will not come in the purview of manpower recruitment or supply service - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant provided services as manpower recruitment to M/s. SRF Ltd.?
2. Whether the demand for service tax liability on the appellant is sustainable?
3. Whether the impugned order upholding the duty liability on the services provided requires interference?

Analysis:
1. The appellant entered into an agreement with M/s. SRF Ltd. for Inspection of Greige Fabric and Trimming/Fringe cutting of belting chafer fabrics. The Department alleged that the appellant only provided manpower and did not pay service tax liability. A Show Cause Notice was issued proposing a demand of ?13,95,497 along with interest and penalties. The original authority and Commissioner (Appeals) confirmed the demand. The appellant argued that payment was based on work executed, not labor supplied, citing legal precedents. The respondent contended that the nature of work was manpower supply. The Tribunal examined the agreement and found that payment was per meter of work done, not based on labor supplied. The services provided did not fall under manpower recruitment. The impugned order was set aside, and the appeal was allowed.

2. The agreement detailed the services to be provided by the appellant, including loading fabric rolls, inspection, trimming, and recording data as per company guidelines. Payment terms were specified based on the quantity of work done per meter. The Tribunal noted that even though the appellant used their manpower, the agreement focused on specific tasks related to fabric inspection and trimming. The payment structure was not indicative of a manpower recruitment service but rather a service based on the quantum of work performed. Therefore, the demand for service tax liability on the appellant was deemed unsustainable.

3. The Tribunal concluded that the services provided by the appellant, as per the agreement with M/s. SRF Ltd., were for specific tasks related to fabric inspection and trimming, and payment was based on the work done per meter. The agreement did not reflect a typical manpower recruitment or supply service arrangement. As a result, the impugned order upholding duty liability on the services provided was found to be incorrect and was set aside. The appeal was allowed with consequential relief as per law.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, examination of the agreement, and the Tribunal's reasoning for setting aside the impugned order and allowing the appeal.