2019 (10) TMI 536 - AT - Service Tax

Classification of services - Manpower recruitment and supply of manpower services or not - contention of appellant is that the scheme of procurement of sugarcane by sugar factories involves state governments which prescribe the support price and the arrangement requiring sugarcane growers to deliver the harvested cane at the factory - HELD THAT - The issue decided in the case of SATARA SAHAKARI SHETU AUDYOGIK OOS TODANI VAHTOOK SOCIETY VERSUS CCE., KOLHAPUR 2014 (12) TMI 42 - CESTAT MUMBAI where it was held that the appellants do not undertake this work for anybody else except for the sugar factory concerned. In other words, they do not supply manpower to any customer who approaches them. Therefore, the impugned demands by classifying the activity under manpower supply service are not sustainable in law. The facts and circumstances of the present case are identical in that it is for, and on behalf of, the sugarcane growers that the sugar factory entered into an agreement as custodian of the dues payable to the farmers for the harvesting and transport to the factory is not manpower recruitment and supply agency services. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Tax liability for 'manpower recruitment and supply agency services'
2. Interpretation of agreement between parties
3. Applicability of legal definitions to the case

Issue 1: Tax liability for 'manpower recruitment and supply agency services'

The judgment concerns an appeal against an order confirming tax liability for providing 'manpower recruitment and supply agency services.' The appellant argued that the activity of providing labor for sugarcane procurement did not fall under this category. The contention was supported by references to previous Tribunal decisions and High Court rulings. The Authorized Representative for the respondent claimed that the transaction between the parties constituted 'manpower supply' due to the labor contract, equipment provision, and fixed rates per ton.

Issue 2: Interpretation of agreement between parties

The judgment analyzed the nature of the agreement between the appellant and the sugar factory. It was argued that the transaction was a labor contract rather than reimbursement for transporting manpower to sugarcane fields. The Tribunal examined the provisions of the agreement and the roles of the parties involved to determine the true nature of the services provided.

Issue 3: Applicability of legal definitions to the case

The judgment delved into the legal definitions of 'Manpower Recruitment or Supply Agency Services' as per Section 65(68) and Section 65(105)(k). It was highlighted that the essence of these definitions involved the supply of labor, which was deemed absent in the case at hand. The interpretation of the agreement between the parties was aligned with the principles outlined in a Supreme Court judgment, emphasizing the need to consider the entire contract to ascertain the parties' intentions accurately.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the services provided did not constitute 'manpower recruitment and supply agency services.' The decision was based on the analysis of the agreement, the absence of labor supply to the sugar factory, and the applicability of legal definitions to the case. The judgment emphasized the importance of interpreting contracts holistically and in line with legal provisions to determine the true nature of services rendered.