2019 (10) TMI 323 - AT - Service Tax

Classification of services - Business auxiliary services or manpower supply and recruitment services? - Devolution of tax liability - cost of transportation of the harvested sugarcane to the factory of M/s Vasant Sahakari Sakhar Kharkhana Ltd. - HELD THAT - The Tribunal has, in SATARA SAHAKARI SHETU AUDYOGIK OOS TODANI VAHTOOK SOCIETY VERSUS CCE., KOLHAPUR 2014 (12) TMI 42 - CESTAT MUMBAI , held that there is no element of manpower supply or recruitment by the appellants to the sugar factory and therefore, the services rendered by the appellants cannot be classified under manpower recruitment or supply agency services, by any stretch of imagination The findings in the impugned order do establish that the appellant was a mere intermediary between its constituents, albeit as a separate artificial person, and the labour contractors to empower in securing most economical supply and to ensure handing over of consideration from the dues, held by M/s Vasant Sahakari Sakhar Kharkhana Ltd, in accordance with the public procurement policy for sugarcane. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Devolution of tax liability under Finance Act, 1994 on receipt of funds from a sister concern for supplying labor to farmers/growers of sugarcane.

Analysis:
The appeal was filed by The Vasantrao Naik Shetkari Sahayata Trust against the tax liability confirmed by the Commissioner of Central Excise & Customs, Nagpur. The tax liability of &8377; 3,76,66,875 under section 73 of Finance Act, 1994, along with interest under section 75 and penalty under section 76 was imposed for services rendered from 2005 to 2008. The appellant received funds from a sister concern for supplying labor to farmers and for transporting harvested sugarcane to the factory. The jurisdictional authorities deemed this taxable under section 65(105)(k) of Finance Act, 1994. The appellant argued that the agreement had nothing to do with the farmers/growers, but the adjudicating authority concluded that the services rendered were taxable.

The Tribunal referred to a previous judgment and held that the appellant was not a manpower recruitment agency as they did not recruit or supply manpower to the sugar factory. The consideration was based on the quantity of sugarcane delivered, not on the supply of manpower. The Tribunal classified the activity under Business Auxiliary Service (BAS) as it was incidental to procurement of goods for the client. The Tribunal found that the appellant acted as an intermediary between its constituents and labor contractors, ensuring the supply was economical and in accordance with public procurement policy for sugarcane. The impugned demands were deemed to have no legal basis, and the appeal was allowed.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, finding that the appellant's services did not fall under manpower supply or recruitment agency services but under Business Auxiliary Service. The adjudicating authority's findings were rendered without the benefit of the Tribunal's decision, and the issue was considered settled in favor of the appellant.