By TIOL News Service

MUMBAI, JAN 31, 2013: THE appellant is a Trust (Sanstha) consisting of farmers and transporters. The farmers undertake harvesting of sugar cane and the truck owners undertake transportation of these from the farmers' fields to the factory of M/s Dudhganga Vedganga Sahakari Sakar Karkhana Limited, Bidri, Kolhapur. The bills for the service rendered to the sugar factory are routed through the Sanstha and the payment is received from the sugar factory to the Sanstha for further distribution to the farmers and the transporters.

The department took a view that the activity undertaken by the appellant falls under the category of ‘Manpower Recruitment and Supply Services' and accordingly a Service Tax demand of Rs.2,21,20,788/- for the services rendered during the period 2005 to 2008 was made on the appellant.

The CCE, Kolhapur confirmed the eye-popping ST demand and imposed an equivalent penalty and interest.

Before the CESTAT with a Stay application the Sanstha submits that -

+ they are a charitable Trust and only a facilitator for the transaction between the farmers on one side and the sugar factory on the other. The farmers enter into an agreement with the sugar factory for harvesting of sugar cane and rates are fixed for harvesting and supply of sugarcane by the two parties. Similarly, for the transport of sugar cane from the farmer's fields to the sugar factory the transporters enter into an agreement with the sugar factory. These agreements for harvesting of the sugarcane and the transport of sugar cane are entered into between the farmers and sugar factory and transporters and the sugar factory. The appellant comes into picture only as a facilitator and there is no agreement between the Sanstha and the sugar factory.

+ Based on the details given by the sugar factory regarding quantum of cane received, bills are raised by the appellant and from the bills raised it can be easily seen that the charges are based on the tonnage of sugarcane supplied and not on the basis of labour employed.

+ the payments are made directly to the accounts of the farmers and the transporters by the sugar factory, who routes these payments through the appellant-Trust and they do not retain any amount and the amounts are straightaway credited to the bank where the farmers and the transporters hold accounts.

+ the appellant Trust does not hold any bank account at all and they had not undertaken any banking transaction during the impugned period.

+ Therefore, the allegation that the appellant-Trust supplied labour to the sugar factory is not borne out from the documents available on record.

The Revenue representative justified the actions of the adjudicating authority by reiterating his findings.

The Bench observed -

“5. We have carefully considered the submissions made by both the sides. From the agreements entered into between the farmers and the transporters with the sugar factory, it is seen that, it is the farmer who is responsible and accountable to the sugar factory for harvesting and supply of sugarcane. Similarly, it is the transporter who is accountable to the sugar factory for the transportation of sugarcane from the farmers' fields to the recipient sugar factory. In other words, the services are directly rendered by the farmers and the transporters to the sugar factory. For these services rendered, the payments are made by the sugar factory on the basis of tonnage of sugarcane received and the amounts are routed through the appellant-Trust for crediting to the bank accounts of the farmers and the transporters. As per clause (68) of section 65 of the Finance Act, 1994 ‘Manpower Recruitment and Supply Agency' means any person engaged in providing any service directly or indirectly in any manner for recruitment and supply of manpower temporarily or otherwise to any other person. In other words, the person has to provide the service with regard to supply of manpower. In the instant case, when the farmers and the transporters have entered into agreements directly with the sugar factory, by no stretch of imagination the appellant-Trust could be considered as a person responsible for supply of manpower to the sugar factory temporarily or otherwise. Further, from the bills raised for the services rendered, it is seen that the amounts are based on quantity of the sugarcane supplied to the sugar factory on the basis of rates agreed upon between the farmer and the sugar factory, and, the transporter and the sugar factory. The appellant-Trust only acts as a facilitator. Similarly, the payments for the services rendered, though received by the Trust by way of cheques are directly deposited into the accounts of the farmers and transporters and the appellant-Trust does not get any consideration nor do they have any bank account for receiving any money. In view of this factual position, we find that the appellant has made out a strong case in his favour for grant of interim stay.”

Accordingly, the Bench granted unconditional waiver of pre-deposit and ordered a Stay in the matter.

Charity begins at home & Silence is Golden!

(See 2013-TIOL-190-CESTAT-MUM)