2017 (1) TMI 1131 - AT - Service Tax

Manpower recruitment and supply service - manufacture of excisable goods or not? - Held that - the Commissioner (Appeals) states that the activities of work (production on behalf of the appellant) done by the respondent in the instant case falls under the category of Business Auxiliary Service . Further, N/N. 14/2004-ST, dated 10/9/2004 exempts taxable service provided to a client by any other persons in relation to the business auxiliary service - appeal rejected - decided against Revenue.

Summary

Issues:
1. Whether the respondent's activities constitute taxable service for manpower recruitment and supply.
2. Whether the respondent's activities fall under the category of "Manpower Recruitment Agency Service."
3. Whether the respondent's activities are covered under the definition of business auxiliary services.
4. Whether the respondent is liable to pay service tax on the activities undertaken.

Analysis:
1. The appeal was filed by Revenue against an order passed by the Commissioner (Appeals), Raipur, regarding the respondent's engagement as a labor contractor providing manpower recruitment and supply services. Revenue contended that service tax should be levied on the payments received by the respondent for these services during 2005-2006 and 2006-2007. However, the Original Authority considered the respondent's activities as the manufacture of excisable goods, excluding them from service tax liability. The Commissioner (Appeals) upheld this decision, leading to the current appeal.

2. The Commissioner (Appeals) analyzed the activities undertaken by the respondent, emphasizing that the work involved in manufacturing did not constitute a manpower recruitment agency service. The Commissioner noted that the respondent was a manufacturing contractor responsible for the labor under his supervision, thereby ruling out the transfer of labor. It was concluded that the respondent's activities did not fall under the category of manpower supply, as asserted by the Revenue.

3. Furthermore, the Commissioner (Appeals) examined whether the respondent's activities could be classified as business auxiliary services. Referring to Notification No. 14/2004-ST, it was found that the respondent's work, particularly in the production of goods on behalf of the client, qualified as business auxiliary services. The notification exempted taxable services related to production of goods for or on behalf of the client from service tax, provided the activity amounted to manufacture within the Central Excise Act, 1944. Consequently, the respondent's activities were considered exempt from service tax under the specified notification.

4. Ultimately, the Appellate Tribunal agreed with the Commissioner (Appeals)'s findings, upholding the decision that no service tax was payable by the respondent for the activities undertaken. The appeal by Revenue was rejected, and the order in favor of the respondent was maintained. Additionally, applications for delay in filing were disposed of during the proceedings.