2014 (11) TMI 335 - AT - Service Tax

Waiver of pre deposit - Manpower Recruitment or Supply Agency Service - appellants deputed certain personnel to JBM premises to carry out checks on the quality of biscuits manufactured by JBM on their behalf - Salaries of the said personnel were recovered from job-workers - Held that - the deputed personnel continue to be employees of M/s Britannia Industries Ltd. (the appellant) and the service provided by them are for the benefit of the appellant and not for the benefit of JBM at all. The appellants are actually forcing upon JBM their personnel to supervise their operations and it is not that JBM are requesting for assistance of these personnel. In the case of manpower supply, the receiver makes a request for service and therefore, the service is provided. Prima facie, we do not find relationship of manpower supply service provider and service receiver between the appellants and JBM. Moreover, we also find the entire demand is time-barred - Stay granted.

Issues:
1. Demand for service tax on 'Manpower Recruitment or Supply Agency Service' provided by the appellants.
2. Interpretation of the agreement between the appellants and job-workers regarding the manufacturing of biscuits.
3. Control and supervision of personnel deputed by the appellants at the job-worker's premises.
4. Application of Circulars and case laws to determine the tax liability.
5. Reimbursement of salaries to personnel and absence of consideration for manpower supply.
6. Invocation of extended period for demand and applicability of penalties.
7. Assessment of liability, filing of returns, and availability of benefits under relevant sections of the Act.

Analysis:
1. The judgment addressed the demand for service tax on 'Manpower Recruitment or Supply Agency Service' provided by the appellants from April 2006 to March 2010. The Revenue imposed penalties under the Finance Act, 1994, based on the view that the appellants supplied personnel to job-workers, leading to the recovery of salaries from the job-workers as consideration for the service provided.

2. The issue revolved around the outsourcing arrangement between the appellants and job-workers for manufacturing biscuits. The appellants deputed personnel to supervise the quality of biscuits manufactured by the job-workers. The agreement with J.B. Mangaram Foods Pvt. Ltd. was scrutinized to determine the nature of the arrangement and the control exercised by the appellants over the manufacturing process.

3. The control and supervision of personnel deputed by the appellants at the job-worker's premises were crucial in determining the tax liability. The appellants argued that the personnel were under their control, not the job-workers, and hence, the Circular on direction and control of service recipients did not apply to their case.

4. The judgment analyzed the applicability of Circulars and case laws to ascertain the tax liability. The appellants cited various clauses of the agreement and legal precedents to support their contention that the service provided was for self-benefit and did not fall under 'manpower supply agency service.'

5. The reimbursement of salaries to personnel and the absence of consideration for manpower supply were key points of contention. The appellants argued that they only recovered actual salary amounts from job-workers and did not charge any additional amount, emphasizing that no consideration was received for manpower supply.

6. The judgment discussed the invocation of the extended period for demand, penalties, and interest. The appellants contended that there was no suppression of facts or intent to evade taxes, and the department's conflicting classification of the transaction as 'Management or Business Consultancy Service' raised questions about the validity of the demand.

7. Lastly, the assessment of liability, regular filing of returns, and the availability of benefits under relevant sections of the Act were considered. The appellants asserted compliance with filing requirements and sought relief under Section 80 of the Act, highlighting their adherence to tax regulations and the absence of intent to evade payment.

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