2021 (9) TMI 985 - AT - Service Tax

Levy of service tax - Man Power Recruitment Supply Service - deputation of employees for the business contingencies arising in their own group companies - HELD THAT - The appellants (formerly known as M/s.Light Alloy Products Ltd.) have deputed their employees for the business contingencies arising in their own group companies such as, M/s.LAP Ross Engineering Ltd; payments for which were made by debit notes or book adjustments. They have not raised any invoice as such and did not collect the service tax. Understandably, the relation between the appellants and the group companies to which their employees have been deputed is not one of an agency and the client. This issue was discussed at length by the Hon ble High Court of Gujarat in the case of COMMISSIONER OF SERVICE TAX VERSUS ARVIND MILLS LTD. 2014 (4) TMI 132 - GUJARAT HIGH COURT where it was held that The definition though provides that Manpower Recruitment Supply Agency means any commercial concern engaged in providing any services directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client, in the present case, the respondent cannot be said to be a commercial concern engaged in providing such specified services to a client. It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. Appeal allowed - decided in favor of appellant.

Summary

Issues: Allegation of providing Man Power Recruitment & Supply Service, Res judicata, Interpretation of Manpower Supply Recruitment Agency

In this case, the appellants, engaged in manufacturing motor vehicle parts, were alleged to have provided 'Man Power Recruitment & Supply Service' by sending/receiving employees on deputation during a specific period. A show cause notice was issued, and penalties were confirmed by the department. The Commissioner (Appeals) upheld the original order. The appellant contended that the issue was not res judicata as a similar issue was decided in their favor by the Tribunal in another case involving their group company.

The Tribunal analyzed the situation and found that the appellants had deputed employees to their group companies for business contingencies, with payments made through debit notes or book adjustments without raising invoices or collecting service tax. The relationship between the appellants and the group companies was not that of an agency and client. Referring to a High Court case, the Tribunal highlighted that the deputation was for the company's interest, with continuous control and supervision remaining with the appellants, not the subsidiary companies. The Tribunal concluded that the appellants did not fall under the definition of a Manpower Supply Recruitment Agency as they were not a commercial concern engaged in providing such services to a client.

Moreover, the Tribunal noted that a previous decision by the same Bench favored the appellants in a similar case, citing relevant case law. Therefore, the Tribunal found that the issue was no longer res integra and had been decisively settled in favor of the appellant. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief as per the law.