2019 (5) TMI 1459 - AT - Service Tax

Levy of service tax - man power recruitment and supply agency service - common facility such as staff etc. used on sharing basis by two sister concerns of the same group companies - HELD THAT - This issue is no longer res integra as in the similar facts in the case of M/S ARVIND MILLS LTD VERSUS COMMISSIONER OF SERVICE TAX 2013 (10) TMI 821 - CESTAT AHMEDABAD wherein it was held that common staff used on sharing basis by two group companies does not amount to provision of service, accordingly, demand of service tax were dropped. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether sharing common staff between sister concerns of the same group companies amounts to providing a taxable service under the category of 'manpower recruitment and supply agency service' for the purpose of service tax liability.

Analysis:

Issue 1: Taxability of Common Staff Sharing
The case involved two sister concerns under the Mehta Group of Companies engaged in cement manufacturing, sharing expenses and staff based on a formula. The dispute centered on whether this arrangement constituted a taxable service under 'manpower recruitment and supply agency service.' The appellant's counsel cited various judgments, including Paramount Communication Ltd and Gujarat State Fertilizers & Chemicals Ltd, to support their contention that sharing common staff does not amount to providing a service. The Tribunal, in line with precedent, held that sharing common staff between group companies does not attract service tax liability. The judgment referred to the case of Arvind Mills Ltd to emphasize that service tax liability applies to commercial concerns engaged primarily in providing manpower recruitment services, which was not the case here. The Tribunal set aside the impugned order, following the established legal position that sharing common staff does not constitute a taxable service.

Judgment Summary:
The Appellate Tribunal CESTAT Ahmedabad, comprising Mr. Ramesh Nair and Mr. Raju, heard the case involving sister concerns under the Mehta Group of Companies engaged in cement manufacturing. The dispute revolved around whether sharing common staff between these companies constituted a taxable service under 'manpower recruitment and supply agency service.' The appellant's counsel relied on various judgments to argue against tax liability, emphasizing that sharing staff did not amount to providing a service. The Tribunal, in line with precedent, ruled that sharing common staff between group companies does not attract service tax liability, setting aside the impugned order based on established legal principles.