2023 (4) TMI 715 - AT - Service Tax

Levy of service tax - Job work - Manpower Supply Agency Service or not - business of transportation of tractors by driving the tractors from the factory of M/s Punjab Tractors Ltd to the premises of dealers - interest - penalty - HELD THAT - Consideration for the job undertaken by the appellants is on the basis of per kilometer. Letter dated 02.01.2004 written by Punjab Tractors Ltd to the appellants indicates the same. The said letter inter alia requests the appellants to organize drivers as required. It appears that the department has understood the same to be request for supply of the drivers and apparently the department did not consider the other terms of the contract. The terms of the contract were not for supply of the drivers. The appellants had to undertake the transportation of tractors from premises of Punjab Tractors Ltd to their dealers and in the bargain they may appoint drivers for the work. Appellants were required to take all responsibilities on the way - even where the wages of the workers or the employees supplied by the agency are paid by the agency, the liability to pay the service tax would be under said agency and not on the clients. In other words, the Circular clarifies that mere payment of wages by the manpower recruitment or supply agency does not take away their status. However, as far as the facts of the present case are concerned, there are no reasons for applying the said circular; the terms of the contract are very clear and the appellants have rendered the job assigned by Punjab Tractors Ltd and did not at all supply any manpower. There are no hesitation whatsoever in concluding that the job work undertaken by the appellants does not fall under the category of Manpower recruitment or supply agency service , therefore, the demand confirmed therein are liable to be set aside - Once demand itself is set aside, the penalty and the interest do not survive - appeal allowed.

Summary

Issues involved:
The appeal is against the Order-in-Original passed by the Commissioner of Central Excise, Chandigarh-I, concerning the classification of services provided by the appellants as 'Manpower Supply Agency Service.'

Comprehensive Details:

Issue 1:
The appellants were engaged in transporting tractors from the factory to dealers, with drivers appointed by them, paid on a per kilometer basis. The department alleged the service fell under 'Manpower Supply Agency Service.'

- The appellants argued that the service was for transportation, not manpower supply, as clarified by the board.
- Various case laws were cited to support the argument.
- The department cited a Circular stating cases like this are covered by 'Manpower Supply Agency Service.'

Issue 2:
The contract terms indicated the appellants were responsible for all aspects of transporting the tractors, including ensuring delivery in good condition, handling accidents, and compliance with statutory formalities.

- The terms did not indicate a supply of drivers but rather transportation services.
- The Circular clarified that even if wages are paid by the agency, the liability for service tax remains with the agency, not the clients.
- Previous tribunal judgments supported the view that job-specific arrangements do not constitute manpower supply.

Conclusion:
The Tribunal concluded that the appellants' work did not fall under 'Manpower Supply Agency Service,' setting aside the demand and associated penalties and interest.

[Order pronounced in the court on 18.04.2023]