2023 (12) TMI 477 - AT - Service Tax

Classification of service - activities of textile processing of the appellant in the factory of the service recipient - levy of service tax - activity of transportation of goods. Classification of service - Manpower Recruitment or Supply Agency Service or not - activities of textile processing of the appellant in the factory of the service recipient - HELD THAT - It is found that as per the contract with Valson Industries the salient terms of the contract is that the contract is a job work contract which includes the activity of warping, weaving, mending, knitting and packaging of grey and finished fabrics and texturizing, twisting, reeling, coning, rebinding and packing of grey and dyed finished yarn for different qualities - From the nature of job work and the service charge therefore it is clear that the contract remotely does not indicate that the activity of the appellant is of Manpower supply or recruitment service. As per the contract the appellant is supposed to carry out various textile processing activities and for which the payment is fixed on per metre basis irrespective of the number of manpower is deputed for the said job work. - It is observed that the appellant have fulfilled all terms and conditions as prescribed under Para 3 of the Board Circular 190/2015 ST dated 15.12.2015. Accordingly the activity of the appellant clearly does not fall under the service of Manpower supply or recruitment service. Therefore, the demand on this count is not sustainable. Levy of service tax - supply of tangible goods for use service - activity of transportation of goods - HELD THAT - It is found that the appellant has merely acted as transporters of goods and issued consignment notes/LR one sample LR - From the above LR it is clear that the appellant has acted as transporter of goods for which the consignment note was issued accordingly the activity of the appellant on this count clearly not classifiable as supply of tangible goods for use hence the demand on this count is not sustainable. The demand of service tax on both the counts is not sustainable - the impugned order is set aside - Appeal allowed.

Issues involved:
The issues involved in the judgment are whether the appellant is liable for service tax under the Manpower and Recruitment Service for textile processing activities and under the Supply of Tangible Goods for Use Service for providing transportation services.

Textile Processing Activities:
The appellant was engaged in textile processing activities under a lump sum contract for a specific period. The department claimed that the appellant should be liable for service tax under the Manpower and Recruitment Service due to accounting service charges under labor charges. However, the appellant argued that the activity falls under a job work contract based on piece rate charges, not under Manpower and Recruitment Services. The tribunal found that the nature of the job work contract indicated that the appellant's activity did not classify as Manpower supply or recruitment service, as clarified by a relevant board circular.

Transportation Services:
Regarding the demand for service tax on the hiring of trucks under the Supply of Tangible Goods for Use Service, the appellant provided transportation services and charged freight for the same. The appellant contended that they acted as transporters of goods, not as suppliers of tangible goods for use. The tribunal examined the consignment notes issued by the appellant and concluded that the activity did not classify as the supply of tangible goods for use. The tribunal referred to various judgments to support this finding.

Conclusion:
After considering the submissions from both sides and examining the records, the tribunal found that the demand for service tax on both counts was not sustainable. The tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, in accordance with the law. The judgment was pronounced in the open court on a specific date.

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