2023 (11) TMI 372 - AT - Service Tax

Classification of services - Manpower Recruitment or Supply Agency Service or not - contract for performance of specific task such as transportation, management, operation and maintenance of calcinations plant - HELD THAT - It can be seen from the work order and the terms, on the basis of which the appellant have rendered the services to M/s. GMDC. The activity covers crushing, screening, calcinations plant operation and proper stacking of calcined bauxite etc. The appellant was required to manufacture/ produce certain quantities of calcinated bauxite as mentioned in the work order - The perusal of the work order and the definitions, it is apparent that for Manpower Recruitment or Supply Agency Service is to supply of manpower temporarily or otherwise to another person, it is necessary that the service provider will only recruit and supply the manpower to the service recipient and the person so providers will be working under the superintendence and control of the service recipient. Thus it is to emphasize that for the activity to be included in the Manpower Recruitment or Supply Agency Service then the control over the manpower should be with the recipient of the service. The service rendered by the appellant to M/s. GMDC does not fall under the category of Manpower Recruitment and Supply Agency Service - there are no merit in the order in original in this regard. Demand of service tax under Business Auxiliary Service - HELD THAT - The facts of the matter are that the appellant have been undertaking work of calcination of raw bauxite into calcined bauxite at their own factory premises. The M/s. Saurashtra Calcined Bauxite and Allied Industries Ltd. (SCABAL) will bring raw bauxite to the appellant's factory premises and the appellant using this in their factory/plant with his own manpower, converted the raw bauxite into calcined bauxite. For the said process of calcination of bauxite, the appellant was paid by M/s. SCABAL at a fixed section per Metric Ton basis - conversion of raw bauxite into calcinated bauxite resulted into emergence of a new substance classifiable under a separate tariff heading and therefore, such activity amounts to manufacturing activity. Since the activity amenity to manufacturing beyond the scope of levy of service tax. Further, as stated in the preceding paras that service recipient has been discharging central excise duty liability on the calcinated bauxite received from the service provider i.e. the appellant, therefore, service provided by the appellant does not fall under the provisions of Business Auxiliary Service. The service provided by the appellant does not fall under the category of Business Auxiliary Service - there are no merit on this count also for demanding service tax - appeal allowed.

Summary

Issues Involved:

1. Classification of services under "Manpower Recruitment and Supply Agency Service".
2. Classification of services under "Business Auxiliary Service".
3. Invocation of extended time proviso under Section 73(1) of the Finance Act, 1994.

Summary:

Issue 1: Classification under "Manpower Recruitment and Supply Agency Service"

The appellant argued that their activities did not fall under "Manpower Recruitment or Supply Agency Service" as their contract was for specific tasks such as transportation, management, operation, and maintenance of a calcination plant, not for the recruitment of manpower. The Tribunal noted that the appellant had full control over the manpower, and the payment was based on the quantity of calcined bauxite produced, not on a per man-hour basis. The Tribunal referenced several case laws and CBEC Circulars which clarified that such contracts do not fall under "Manpower Recruitment or Supply Agency Service". The Tribunal concluded that the service provided by the appellant to GMDC did not fall under this category, thus setting aside the demand under this head.

Issue 2: Classification under "Business Auxiliary Service"

The appellant contended that converting raw bauxite into calcined bauxite constituted manufacturing, which is not taxable under "Business Auxiliary Service". The Tribunal agreed, noting that the process resulted in a new product with a different tariff heading, thus amounting to manufacture. The Tribunal cited various case laws and CBEC Circulars supporting this view and highlighted that SCABAL cleared the calcined bauxite on payment of excise duty. Consequently, the Tribunal held that the service provided by the appellant did not fall under "Business Auxiliary Service" and set aside the demand.

Issue 3: Invocation of Extended Time Proviso

The appellant argued against the invocation of the extended time proviso under Section 73(1) of the Finance Act, 1994, asserting that there was no suppression of facts. The Tribunal noted that previous audits had not raised any objections, and the appellant had regularly filed ST-3 returns. The Tribunal referenced several case laws supporting the appellant's position and concluded that the extended period was not invokable.

Conclusion:

The Tribunal found no merit in the order-in-original and set aside the same, allowing the appeal. The services provided by the appellant were not classified under "Manpower Recruitment and Supply Agency Service" or "Business Auxiliary Service", and the invocation of the extended time proviso was not justified. The appeal was pronounced in the open court on 08.11.2023.