2017 (10) TMI 348 - AT - Service Tax

Levy of service tax - Manpower Recruitment & Supply Agency Service - persons employed in subsidiary unit - Held that - the appellant has employed certain persons in their subsidiary unit for which the department has raised the demand under the category of Manpower Recruitment & Supply Agency Service . The issue stands covered by the judgment in the case of Aravind Mills Ltd. 2014 (4) TMI 132 - GUJARAT HIGH COURT , where it was held that company is not in the business of providing recruitment or supply of manpower. Actual cost incurred by the company in terms of salary, remuneration and perquisites is only reimbursed by the group companies. There is no element of profit or finance benefit. The subsidiary companies cannot be said to be their clients. Deputation of the employees was only for and in the interest of the company - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of service tax on 'Manpower Recruitment & Supply Agency Service'

Analysis:
The appellant challenged the demand of service tax on the service provided by them, arguing that they had appointed employees in their subsidiary company and were not liable to pay service tax under the category of Manpower Recruitment & Supply Agency Service. The appellant relied on the judgment in the case of Commissioner of Service Tax Vs. Arvind Mills Ltd. The Revenue, represented by the learned AR, reiterated the findings in the impugned order.

Upon hearing both sides, the Tribunal examined the records and found that the appellant had indeed employed individuals in their subsidiary unit, leading to the demand raised under the category of Manpower Recruitment & Supply Agency Service. The Tribunal referred to the judgment in the case of Aravind Mills Ltd., which highlighted that the deputation of staff to subsidiaries did not constitute a commercial concern engaged in providing recruitment or supply of manpower services to a client. It was emphasized that the control and supervision of the employees remained with the appellant, and there was no agency-client relationship with the subsidiary companies.

Based on the facts and the precedent set by the Aravind Mills Ltd. case, the Tribunal concluded that the demand for service tax was not sustainable and needed to be set aside. The judgment was in favor of the appellant, and the appeal was allowed with any consequential relief. The operative portion of the order was pronounced in open court.