2023 (5) TMI 393 - AT - Service Tax

Classification of services - Manpower Recruitment or Supply Agency service or not - providing specified jobs such as packing loading and unloading cleaning etc. at the premises of M/s. Livia - privity of contract - employee-employer relationship - HELD THAT - A perusal of the labour contract entered into between the appellants and M/s. Livia indicate that M/s. Livia has agreed to pay the contractor on rate contract basis which will be determined from time to time on the basis of the nature of the work executed. Supervision and control over the work of the personnel employed by the contractor shall be with the contractor himself or his representatives M/s. Livia will not in any manner supervise the work of the employees of the appellants and the appellants are responsible for all the acts and conduct of the workmen and if any loss costs should be reimbursed to M/s. Livia - The principal will have the privity of contract with the appellants and he would be giving instructions to the contractor only and would not have anything concerned with the workmen of the appellants and the appellants are free to work anywhere else and also undertake any work provided he remains responsible for execution of the specified jobs entrusted. A plethora of decisions by various benches of the Tribunal holding that where the contracts provide for payment of services on piece rate basis and where the supervision over the workmen employed remains with the contractors where the employee-employer relationship exists between the contractor and his workmen supplied the services are not classifiable under Manpower recruitment or Supply Agency service . Regarding Revenue s reliance on the decision rendered in ADIRAJ MANPOWER SERVICES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE II 2022 (2) TMI 858 - SUPREME COURT is not applicable since the same is distinguishable as the facts involved are different and the issue involved therein was the appropriate classification of the services of the appellant whether under Job work or under Manpower Recruitment or Supply Agency service. The issue before the Court was whether the appellant is a Job Worker within the meaning of the exemption Notification dated 20.06.2012 or is merely a supplier of contract labour for work of the establishment. On the basis of a detailed analysis of the contracts entered into and other connected records in these appeals the tax demands raised under Manpower Recruitment or Supply Agency service cannot sustain and hence the impugned orders are liable to be set aside - No findings are required to be recorded on the issues of invoking extended period and imposition of penalty - Appeal allowed.

Summary

Issues Involved:
1. Classification of services under "Manpower Recruitment or Supply Agency" service.
2. Applicability of service tax.
3. Imposition of penalty and invocation of the extended period.

Summary:

1. Classification of Services:
The primary issue in these appeals pertains to whether the activities undertaken by the appellants are taxable under the heading "Manpower Recruitment or Supply Agency" service as defined under Section 65(68) of the Finance Act, 1994. The department's assertion is that the appellants are engaged in the supply of manpower, as there is an employee-employer relationship between the appellants and the persons carrying out the specified works. The appellants, however, argue that they are engaged in carrying out specified works such as packing, loading & unloading, and cleaning, which do not amount to supplying manpower to M/s. Livia.

2. Applicability of Service Tax:
The appellants contend that their activities are not taxable under "Manpower Recruitment or Supply Agency" service, supported by the Board's Circular No. 190/9/2015-ST dated 15.12.2015, which clarifies that similar activities are not liable to tax under this heading. The appellants also cite several Tribunal decisions where agreements for execution of lump-sum work on a per-piece rate basis were not classified as manpower supply services. The Tribunal agreed with the appellants, noting that the contracts provided for payment based on the quantum of work handled and that supervision and control over the workmen remained with the appellants.

3. Imposition of Penalty and Invocation of Extended Period:
The appellants argued that no penalty should be imposed as the issue involves interpretation of law, referencing decisions by the Chennai Bench of the Tribunal. They also contended that the extended period is not invokable, citing the decision in International Merchandising Co, LLC Vs. CST, New Delhi. The Tribunal did not find it necessary to record findings on these issues as the appeals were disposed of on merits.

Conclusion:
The Tribunal concluded that the tax demands raised under 'Manpower Recruitment or Supply Agency' service could not be sustained. The impugned orders were set aside, and the appeals were allowed with consequential reliefs as per law. The Tribunal emphasized that the agreements indicated specific jobs assigned to the appellants, paid on a piece-rate basis, with supervision and control over the workmen resting with the appellants.