2019 (6) TMI 11 - AT - Service Tax

Classification of services - Manpower Recruitment or Supply Agency Service - operations and maintenance of ONGC s drilling rigs by mobilizing and making available the necessary manpower with due qualification and expertise - HELD THAT - The contracts have been entered into for the purpose of operating and maintaining oil rigs by M/s FCSP as well as APL. No doubt the contract requires the appellant to make available sufficient trained and competent personnel for carrying out the agreed activity. The terms of the contract when taken as a whole including the clauses specifying the consideration payable it is evident that the appellants are not only required to make available necessary manpower but also are contracted to complete the task assigned to them i.e. carrying out the operation and maintenance of the drilling rig. Consideration payable is not on the basis of manpower supplied but on the basis of completion of work involved and is paid as lumsum per day of operation per rig. The terms of contract indicate that the appellants were not required to merely supply manpower or make such manpower available to M/s ONGC but were required to carry out the task outlined in the agreement. The activity carried out by the appellants cannot fall within the category of Manpower Recruitment or Supply Agency Service - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the activities carried out by the service providers for M/s ONGC and M/s Oil India Ltd. fall under the category of Manpower Recruitment and Supply Agency Services as per the Finance Act, 1994.
- Whether the consideration paid to the service providers was for the supply of manpower or for the completion of specific tasks.
- Whether the definition of Manpower Recruitment or Supply Agency Service covers the activities performed by the appellants.
- Whether the Tribunal's decision in the case of Cauvery Enterprises can be applied to the present appeals.

Analysis:

Issue 1:
The Department contended that the services provided by the appellants to M/s ONGC and M/s Oil India Ltd. were akin to Manpower Recruitment and Supply Agency Services. Showcause notices were issued proposing service tax demands for the respective periods. The appellants contested this claim, arguing that the activities did not involve recruitment or supply of manpower.

Issue 2:
The appellants emphasized that the consideration paid was for the completion of tasks outlined in the contracts, not for the supply of manpower. They highlighted that the workforce remained under their control throughout the operations, indicating that the payments were based on work completed, not on the number of individuals supplied.

Issue 3:
The definition of Manpower Recruitment or Supply Agency Service underwent changes during the disputed period. The Tribunal analyzed the terms of the contracts and concluded that the appellants were contracted to carry out specific tasks, not just to supply manpower. The consideration was tied to the completion of work, not the supply of personnel.

Issue 4:
The Tribunal referred to its previous decision in the case of Cauvery Enterprises, where it was established that for a service to fall under Manpower Recruitment or Supply Agency Service, payments must be related to the number of individuals supplied. If the service provider is paid based on work completed, not on the number of personnel supplied, it does not qualify as Manpower Recruitment or Supply Agency Service. The Tribunal applied this reasoning to the present appeals and set aside the demand for service tax, allowing the appeals.

This detailed analysis of the judgment showcases the key arguments presented by the parties, the legal interpretation of the relevant provisions, and the application of precedent to arrive at the final decision in favor of the appellants.