2024 (7) TMI 111 - AT - Service Tax

Classification of services - Manpower supply service or cleaning services - supply of manpower to M/s. HLL in terms of Agreements entered into by him with them for painting, cleaning, civil works, carpentry works, loading and unloading - burden of proof - HELD THAT - Classification of services is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify a service under a particular category different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. The judgments of the Hon ble Supreme Court in UNION OF INDIA VERSUS GARWARE NYLONS LTD. 1996 (9) TMI 123 - SUPREME COURT , HPL CHEMICALS LTD. VERSUS CCE, CHANDIGARH 2006 (4) TMI 1 - SUPREME COURT , PUMA AYURVEDIC HERBAL (P) LTD. VERSUS COMMISSIONER OF C. EX., NAGPUR 2006 (3) TMI 141 - SUPREME COURT , although rendered in the case of classification under the Central Excise Act is also relevant for classification of a service under the Finance Act 1994. It is found that no test has been applied to determine the relationship of the service provider and the workmen being one between master and servant (Maintenance and Repair) or between supplier and recipient of service being between principal to principal, (Manpower Recruitment). The contract between the parties have also not been examined in detail and the relationships between the parties brought out nor has the intention or essential character of the contract been delineated and discussed. Revenue has not proved its case regarding the true nature of the disputed activity. Hence the question of examining the correctness of the extended period invoked or imposition of penalty does not arise. There are no hesitation in setting aside the impugned order and allowing the appeal - appeal disposed off.

Summary

Issues:
Classification of services provided by the appellant under Manpower Recruitment and Supply Agency's Services, Maintenance or Repairs Services, and Cleaning Services to M/s. Hindustan Lever Ltd. (HLL) from April 2005 to March 2009. Discrepancies in service tax declaration and payment leading to demand notices and penalties.

Analysis:
1. The appellant provided various services to HLL, including loading/unloading, civil jobs, carpentry, painting, and cleaning. The appellant classified the services under 'Manpower supply' based on agreements with HLL. The appellant argued that even though the manpower undertook different tasks, they were supplied under common agreements on a per day basis, justifying the classification under 'Manpower supply' as per Section 65A(2)(b) of the Finance Act, 1994. Legal precedents and CBEC's clarification supported this classification principle.

2. The appellant contested the demand notices issued by the adjudicating authority, highlighting that audit officers had previously determined a lower service tax liability. The appellant referenced a tribunal decision to support the argument that the demand confirmation under cleaning services for the period in question was not justified due to a change of opinion by the department.

3. The department, represented by the Joint Commissioner, supported the findings in the impugned order and sought dismissal of the appeal.

4. The Tribunal emphasized that the burden of proof for service classification lies with the Revenue. Legal precedents from the Supreme Court were cited to underscore the importance of proper evidence when challenging the classification claimed by the assessee. The Tribunal noted that the appellant's activities could be undertaken by either the service recipient or the provider, raising questions about the nature of the contract and the relationship between the parties.

5. The Tribunal found that no detailed examination of the contract, relationship dynamics, or essential character of the services had been conducted. Citing legal principles, the Tribunal emphasized the importance of determining the essential character of the activity for correct classification. Due to the lack of evidence regarding the true nature of the disputed activity, the classification as Maintenance, Management, or Repair Service could not be upheld based on assumptions.

6. Consequently, the Tribunal set aside the impugned order, allowing the appeal and granting the appellant eligibility for consequential relief as per the law. The decision was pronounced in open court on 02.07.2024.