2023 (12) TMI 80 - AT - Service Tax

Classification of service - Manpower Recruitment Supply Agency or not - material period executed various jobs entrusted to them in the plants of HEC, as per the Work Orders issued by HEC, on principal to principal basis - HELD THAT - A plain reading of the definition of the term Manpower Recruitment or Supply Agency clearly reveals in order to fall within the above definition, the activity should be for providing any service directly or indirectly in any manner for recruitment or supply of man-power temporarily or otherwise to a client. A perusal of the Work Orders issued by HEC clearly reveals that the Appellant societies executed the jobs as the contractors by engaging the workers from their roll and it further reveals that the job was mentioned in terms of quantity and not based on number of workmen supplied or engaged. The rate was fixed per Ton basis. The agreements as per the Work Orders did not require or specify the number of workers to be employed and the number of days for which the workers would be engaged. It is for the respective appellant societies to execute the jobs, specified in the Work Orders by deploying as many numbers of workers as per its convenience and discretion. The Principal Company HEC was interested only in the execution of the job entrusted to the Appellant societies at the agreed rates and also within the specified time frame - The wage bills of the workers are not only properly prepared as per Minimum Wages Act, but also paid and their CPF, ESI etc. are properly deducted and deposited to the respective authorities. This does not means that the man power supplied were under the rolls of HEC. Thus, it is observed that the service rendered by the Appellant would not fall within the ambit of Manpower Recruitment Supply Agency as defined under Section 65(68) of the Act read with Section 65(105) (k). The impugned order confirming the demands under Manpower Recruitment Supply Agency service is not sustainable - Since the demand itself is not sustainable, the question of charging interest or imposing penalty does not arise - Appeal allowed.

Summary

Issues Involved:
1. Whether the services provided by the Appellant societies fall under the definition of "Manpower Recruitment or Supply Agency" as per Section 65(68) of the Finance Act, 1994.
2. Whether the demand for service tax and the penalties imposed are sustainable.

Summary of Judgment:

Issue 1: Definition of "Manpower Recruitment or Supply Agency"
The primary issue to be decided was whether the Appellant societies acted as manpower supply agencies and if their services fell within the definition of "Manpower Recruitment & Supply Agency" as per Section 65(68) of the Finance Act, 1994, read with Section 65(105)(k).

The Appellants argued that their services were not in the nature of "Manpower Recruitment or Supply Agency" but were executed as contractors engaging workers from their roll. The Work Orders from HEC specified jobs in terms of quantity and not based on the number of workmen supplied. The rate was fixed per Ton basis, and the agreements did not specify the number of workers to be employed or the duration of their engagement. The Appellants had the discretion to deploy as many workers as needed to complete the jobs within the specified time frame.

The Tribunal observed that the Work Orders did not indicate that the manpower supplied was under the rolls of HEC. The Appellant societies executed the jobs as contractors, and the Principal Company HEC ensured compliance with labor laws to prevent exploitation of workers. The Tribunal concluded that the services rendered by the Appellants did not fall within the ambit of "Manpower Recruitment & Supply Agency" as defined under Section 65(68) of the Act.

Issue 2: Demand for Service Tax and Penalties
The Tribunal referred to several precedent decisions, including CC, CEX & ST, Aurangabad vs. Shri Samarth Sevabhavi Trust, which held that services involving execution of work by deploying manpower do not fall under the definition of "Manpower Recruitment or Supply Agency." The Tribunal found that the impugned order confirming the demands under "Manpower Recruitment & Supply Agency" service was not sustainable.

Since the demand itself was not sustainable, the Tribunal held that the question of charging interest or imposing penalties did not arise.

Conclusion
The Tribunal set aside the impugned order and allowed the appeals filed by the Appellants, concluding that the services provided did not fall under the definition of "Manpower Recruitment or Supply Agency" and thus were not liable for service tax. The operative part of the order was pronounced in the open Court.