2009 (12) TMI 152 - AT - Service Tax

Manpower recruitment or supply agency s services- The assessee entered into a contract for rendering service of loading, unloading, stacking, destacking, bagging, weighing, standardization, etc. the revenue found that the assessee had supplied labourers and felt that the services rendered by the assessee would fall under the category of manpower recruitment and supply agency and held that, the assessee was liable to pay service tax. Accordingly a Show cause notice was issued to the assessee. The assesese contended that contract was a work contract not for supply of labourers. The Adjudicating Authority hold that the staff supplied is the employees of the assesee, thus employer and amployee relation existed. Thus confirm the demand. Commissioner (Appeals) upheld the order. Held that- in the entire records, it was found that there was no whisper of supply manpower. The contracts and the invoice issued by the assessee showed that the entire essence of the contract was in execution of work as understood by the assessee and the recipient of the services. An identical view was taken by the Supreme Court in different cases. The said ratio also applicable in this case. The entire tenure of the agreement and the purchase order issued by the service recipient clearly indicated the execution of a lump sum work. The lump sum work would not fall under the category of providing of service, or supply of manpower temporarily or otherwise, either directly or indirectly. Accordingly, the impugned order raising demand and imposing penalty was liable to be set aside, and appeal was to be allowed.

Issues Involved:
1. Classification of services rendered by the appellant.
2. Applicability of service tax on the services rendered.
3. Interpretation of the contract between the appellant and the service recipient.
4. Reliance on CBEC circulars and Master Circular for classification.
5. Limitation and statutory compliance by the appellant.

Issue-wise Detailed Analysis:

1. Classification of Services Rendered by the Appellant:
The primary issue was whether the services rendered by the appellant fell under the category of "manpower recruitment & supply agency." The appellant argued that the contract was for executing specific tasks such as loading, unloading, stacking, and weighing, and not for supplying manpower. The adjudicating authority, however, classified the services under "manpower recruitment and supply services," leading to the demand for service tax, interest, and penalties.

2. Applicability of Service Tax on the Services Rendered:
The adjudicating authority concluded that the appellant was liable for service tax under "manpower recruitment & supply agency" services. The appellant contested this, arguing that the contract with M/s. Aspin Wall & Co. was a works contract, not for supplying labor. The Tribunal examined the definitions under section 65(68) and section 65(105)(k) of the Finance Act, 1994, which require the activity to involve recruitment or supply of manpower. The Tribunal found that the appellant's contract was for executing specific tasks and not for supplying manpower, thus not attracting service tax under the said category.

3. Interpretation of the Contract Between the Appellant and the Service Recipient:
The Tribunal analyzed the contract terms, noting that the essence of the contract was the execution of work, not the supply of manpower. The Supreme Court's rulings in similar cases, such as Super Poly Fabriks Ltd. and Kone Elevators (India) Ltd., were cited to emphasize that the substance of the contract is crucial. The Tribunal concluded that the contract was for lump-sum work and not for supplying manpower, thus supporting the appellant's argument.

4. Reliance on CBEC Circulars and Master Circular for Classification:
The adjudicating authority relied on CBEC Circular No. B1/6/2005-TRU and the Master Circular dated 23-8-2007 to classify the services. The Tribunal found that these circulars were not applicable as they pertained to the supply of manpower, whereas the appellant's contract was for executing specific tasks. The Tribunal held that the reliance on these circulars did not support the revenue's case.

5. Limitation and Statutory Compliance by the Appellant:
The appellant argued that the show-cause notice was time-barred and that they were registered under different service categories, with the department being aware of their activities. The Tribunal did not delve into this issue, as the appeal was decided on the merits of the service classification.

Conclusion:
The Tribunal set aside the impugned order, concluding that the services rendered by the appellant did not fall under "manpower recruitment & supply agency" and thus were not liable for service tax under that category. The appeal was allowed with consequential relief, and no findings were recorded on other submissions due to the decision on the primary issue.

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