2021 (9) TMI 416 - AT - Service Tax

Scope of taxability - Manpower recruitment or supply agency service - remuneration offered in work-orders were on piece rate - exemption initially taken registration as provider of business auxiliary service which, however, was surrendered upon coverage by the exclusion in N/N. 8/2005-ST dated 1st March 2005 - HELD THAT - Two aspects are starkly prominent insofar as the present dispute is concerned the recipient of the service had been discharging a portion of the tax liability that devolved on them in accordance with the specific prescription for manpower recruitment or supply agency service after 1st July 2012 and it has been held by the Tribunal in several decisions, that coverage under manpower recruitment or supply agency service for tax may be determined by the manner in which consideration is packaged. The Contract Labour (Regulation and Abolition) Act, 1970, intended for the specific purpose of ensuring proper working conditions of those not in regular employment, does not, in the light of the specific definitions in Finance Act, 1994, provide adequate support to fasten tax liability. That is not relevant to the dispute and may be ignored. It is seen from the findings of the adjudicating authority that the claim of the appellant of having engaged in contract on piece rate basis , though undeniable in some of the work orders , has been disregarded in the impugned order. Having identified some of the work orders to contain compensation on man day basis, it was incumbent upon the adjudicating authority, in the light of such finding, to segregate those to which, in accordance with the precedent arising from decisions of the Tribunal, coverage under that taxable service would not extend. This, the adjudicating authority has failed to do. The tax liability of the appellant for the period after 1st July 2012 also needs ascertainment by segregation of the work-orders on which tax liability may arise and re-examining those in the light of statutory provision and judicial precedent - the dispute remnaded back to the original authority for a fresh decision - appeal allowed by way of remand.

Summary

Issues:
Levy of service tax under 'manpower recruitment or supply agency service' for the period from April 2008 to March 2013, applicability of interest and penalty under Finance Act, 1994, interpretation of work orders, determination of tax liability based on consideration packaging, relevance of Contract Labour (Regulation and Abolition) Act, 1970, and the need for fresh decision and evaluation of contentions.

Analysis:
The appellant challenged the levy of service tax under 'manpower recruitment or supply agency service' for the period from April 2008 to March 2013, along with interest and penalty under Finance Act, 1994. The appellant, engaged in finishing castings for a manufacturer, contended that the remuneration offered in work-orders was on a 'piece rate' basis, which, as per Tribunal decisions, excluded coverage under taxable service. The Tribunal cited precedents emphasizing the importance of how consideration is packaged to determine tax liability under such services.

The Contract Labour (Regulation and Abolition) Act, 1970, was considered by the Authorized Representative to establish the appellant's business of supplying manpower, while the appellant argued that the Act did not support fastening tax liability. The Tribunal noted that the recipient had been discharging tax liability post-July 2012 under specific provisions for 'manpower recruitment or supply agency service', and the consideration packaging in work orders played a crucial role in determining tax applicability.

The Tribunal found that the adjudicating authority had disregarded the 'piece rate' basis claimed by the appellant for some work orders and failed to segregate those with 'man day' compensation, which could impact tax liability. Therefore, the impugned order was set aside, and the dispute remanded for a fresh decision, including a reevaluation of the contentions raised by the appellant. The need for segregating work orders and reexamining tax liability post-July 2012 based on statutory provisions and judicial precedents was emphasized for a proper determination.

In conclusion, the Tribunal highlighted the importance of consideration packaging in work orders for determining tax liability under 'manpower recruitment or supply agency service', set aside the impugned order, and remanded the dispute for a fresh decision. The case underscores the significance of proper evaluation and segregation of work orders to ascertain tax liability accurately, especially concerning the period post-July 2012, based on legal provisions and judicial precedents.