2009 (10) TMI 182 - AT - Service Tax

Manpower recruitment or supply agency- the assessee entered into a contracts with different part for lump sum cargo handling for granite export and also for the purpose of rendering services of handling of bulk goods, bagging of fertilizers of bags for filling of fertilizers, stacking, destacking etc. whether service provided by assessee would not fall under category of providing of service of supply of manpower temporary or otherwise either directly or indirectly? Held that- as per the master circular dated 23.8.2007 would be appropriate in the case where services of manpower recruitment and supply agency had been temporarily taken by the business or the industrial association for supplying of manpower and may/may not be for execution of a specific work. Therefore, the reliance placed by the adj. authority on the said circular would not carry the case of the revenue any further. Thus impugned order set aside.

Issues Involved:
1. Classification of services rendered by the appellants.
2. Applicability of service tax under 'manpower recruitment and supply agency'.
3. Validity of invoking the extended period for demand.
4. Interpretation of contractual agreements between the appellants and service recipients.
5. Relevance of CBEC circulars and Board clarifications.

Issue-Wise Detailed Analysis:

1. Classification of Services Rendered by the Appellants:
The primary issue was whether the services rendered by the appellants fall under the category of 'manpower recruitment and supply agency'. The appellants had entered into contracts with M/s. Aspin Wall & Co. and Central Warehousing Corporation (CWC) for handling various cargo-related tasks. The lower authorities concluded that the appellants were supplying laborers and classified the services under 'manpower recruitment and supply agency'. The adjudicating authority confirmed this classification, stating that the essence of the activity was the supply of laborers, despite the contract not explicitly mentioning 'supply of manpower'.

2. Applicability of Service Tax:
The adjudicating authority held that the appellants were liable for service tax for the periods specified in the appeals, as the services rendered were classified under 'manpower recruitment and supply agency'. The appellants contested this, arguing that the contracts were for executing specific jobs and not for supplying laborers. They highlighted that the compensation was based on the quantity of work executed, not on the supply of manpower. The Tribunal noted that the contracts and invoices indicated the execution of work rather than the supply of manpower, thus not falling under the taxable service category defined under section 65(105)(k) of the Finance Act.

3. Validity of Invoking the Extended Period for Demand:
The adjudicating authority justified invoking the extended period due to non-payment of service tax and suppression of facts by the appellants. The appellants argued that they had registered under other service categories and the department was aware of their activities, thus the extended period should not apply. The Tribunal did not explicitly address this issue in the final decision, as the appeals were disposed of on merits.

4. Interpretation of Contractual Agreements:
The appellants contended that the contracts with M/s. Aspin Wall & Co. and CWC were for specific job execution and not for labor supply. They cited various Supreme Court judgments emphasizing that the essence of a contract should determine the nature of the transaction. The Tribunal agreed, finding that the contracts were for lump-sum work execution and not for supplying manpower. The Tribunal referenced the Supreme Court's stance that the overall tenor of the agreement should reflect the parties' roles and intentions.

5. Relevance of CBEC Circulars and Board Clarifications:
The adjudicating authority and the respondent relied on CBEC circulars to support the classification under 'manpower recruitment and supply agency'. The appellants argued that these circulars were out of context and did not apply to their situation. The Tribunal examined the Master Circular dated 23-8-2007, which clarified the scope of 'manpower recruitment or supply agency'. The Tribunal concluded that the circulars did not apply as the appellants' contracts were for job execution, not manpower supply.

Conclusion:
The Tribunal set aside the impugned orders, concluding that the services rendered by the appellants did not fall under 'manpower recruitment and supply agency'. The appeals were allowed with consequential relief, and no findings were recorded on other submissions due to the merits-based disposal of the appeals.

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