2014 (3) TMI 861 - AT - Service Tax

Stay application - assistance in providing labourers for cutting sugar cane - Whether the assistance so provided is covered under the definition of man-power supply or recruitment agency service under Section 65(105)(k) of the Finance Act, 1994 read with Section 65(68) of the Act - Held that - Prima facie, we are of the view that the applicant is not engaged in the business of supply of man-power for consideration. Though a relationship between the applicant and labourers as employer and employee may not be an essential criterion for the service to fall under the definition at section 65(68), in the absence of employer employee relationship the payment for the labourers cannot be considered to be paid to the applicant. The payment is only routed through them. As per section 67 of the Finance Act 1994, service tax can be demanded only on consideration received by the service provider. The amount of ₹ 4/- PMT charged appears to be for transportation of the employees from one site to the other and not towards consideration of services rendered by the applicant - Following decision of the case of M/s. Thiru Arroraran Sugars Ltd. 2013 (9) TMI 951 - CESTAT MUMBAI - Stay granted.

Summary

Issues Involved:
Interpretation of whether the assistance provided by a sugar factory in supplying laborers for cutting sugar cane falls under the definition of "man-power supply or recruitment agency service" for the purpose of service tax liability.

Analysis:
The case involved a dispute regarding whether the assistance provided by a sugar factory in supplying laborers for cutting sugar cane falls under the definition of "man-power supply or recruitment agency service" as per the relevant sections of the Finance Act, 1994. The Revenue contended that the factory was providing services falling under this category and issued show-cause notices demanding service tax. The factory argued that they were not recruiting individuals for employment by farmers and that the laborers were not their employees but were mobilized from a database. They maintained that they did not retain any consideration for providing the service, and thus, no service tax should be levied. The factory also highlighted a specific exemption introduced by the government in 2011 for such services, indicating no intention to tax such activities.

The Revenue, on the other hand, argued that the factory was maintaining rolls of laborers, paying them advances, and organizing their availability for farmers, thereby falling under the definition of a manpower supply agency. They contended that there was consideration involved, as evidenced by the charge collected by the factory for administrative purposes. The Revenue emphasized the organized nature of the activity and the control the factory had over the laborers, suggesting they could be deemed temporary employees.

Upon considering the arguments from both sides, the Tribunal observed that the factory was not engaged in supplying manpower for consideration. While acknowledging that an employer-employee relationship was not indispensable for the service to fall under the relevant definition, the Tribunal noted that in the absence of such a relationship, the payment for laborers could not be attributed to the factory. The Tribunal found that the charge collected was likely for transportation services and not for the labor itself. Referring to a previous case with similar circumstances, the Tribunal decided to grant a waiver of pre-deposit for admission of the appeal and ordered a stay on the collection of dues pending appeal hearings.

In conclusion, the Tribunal ruled in favor of the factory, holding that no service tax was leviable on the activity in question under the relevant sections of the Finance Act, 1994. The decision was based on the absence of a direct consideration received by the factory for supplying laborers, and the waiver of pre-deposit was granted for the admission of the appeal, with a stay on the collection of any dues until the appeal proceedings.