ST - Nature of work undertaken by respondent must be understood in context in which it was understood by respondent and its principal (sugar factory) - services are not 'Manpower Recruitment or Supply Agency Services': HC
By TIOL News Service
MUMBAI, FEB 03, 2015: THIS is a Revenue appeal.
The respondent entered into a contract with one M/s. Kopargaon Sahakari Sakhar Karkhana Limited for providing certain services. The agreement between these two parties was in essence to harvest the sugarcane of the members of the Karkhana from their fields, load them in various vehicles and deliver them at factory site. For these services, the respondent was to get charges on tonnage basis.
The respondent, admittedly, engaged number of labour for harvesting the sugarcane, loading it in vehicle and unloading it at factory site.
A SCN was issued on 16.10.2008 alleging that the services provided by the respondent were classifiable as 'Manpower Recruitment or Supply Agency Services' effective from 16.06.2005 and demanding Service Tax.
In the first round of litigation the matter went up to the High Court when the matter was remanded to the Tribunal vide order dated 5.9.2012. While remanding the appeals, the Bombay High Court held that the appellant shall not claim refund of service tax already collected and paid to the Revenue.
In the second round, the Tribunal inter alia allowed the appeal - 2013-TIOL-1986-CESTAT-MUM by holding thus -
ST - Manpower recruitment or Supply agency service - Appellants are private limited companies and entered into contract with labour contractors for cutting and transporting sugarcane through labourers from producer/members supplying the sugarcane to the factory - service brought under the tax net under 'Manpower Recruitment or Supply Agency Service' envisages supply of labour per se - In the instant case there is no supply of labour per se to the sugar factory - Work undertaken is harvesting of sugar cane and transporting the same to the sugar factory for which labour is employed - Sugar cane belongs to the sugar factory in terms of the agreement of sale executed between the farmer and the sugar factory and, therefore, the activity undertaken by the appellant is one of procuring or processing of the goods belonging to the client which is classifiable under 'Business Auxiliary Service' and not under 'Manpower Recruitment of Supply Agency Service' - ratio of Tribunal decision in Amrit Sanjivini Sugarcane Transport Co. Pvt. Ltd. - 2013-TIOL-1097-CESTAT-MUM is fully applicable to the facts of the present case - Order set aside and appeals allowed: CESTAT [para 5, 6]
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Against this order, the CCE, Aurangabad is before the Bombay High Court.
In the words of the High Court, the counsel for the Revenue tried quite hard to convince this Court that looking to the nature of work undertaken by the respondent, it would come within the definition of manpower recruitment.
After considering the submissions made, the High Court observed thus -
+ We are not inclined to accept this submission because, as said above, the services provided by the respondent, though for harvesting, loading, unloading, etc., it was essentially a package deal through which the sugar factory would get their essential raw material supplied to their factory site. In what manner the work is done was known to the sugar factory but was not their concern really. The sugar factory was aware that this work is done with the help of number of labourers, whose services are procured by the respondent either individually or through some other agencies but how was such work done was not the concern of the sugar factory.
+ The nature of work undertaken by the respondent must be understood in the context in which it was understood by the respondent and its principal-sugar factory. [Apex court decision in Super Poly Fabriks Ltd. Vs. Commissioner of C. Ex., Punjab - 2008-TIOL-82-SC-ST relied upon, Paragraph No. 8 refers]
+ In any case, the agreement itself is eloquent enough to draw the above conclusion. In this background, we must look at the show cause notice dated 16.10.2008. On that date, whether the Revenue was in a position to levy tax on services provided by the respondent? The answer has to be in negative.
The Revenue appeal was dismissed.
(See 2015-TIOL-253-HC-MUM-ST)
