Appointment of Tractor Driver based on Agreement does not fall under 'Man Power Recruitment or Supply Agency': CESTAT sets aside  Service Tax Demand

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that appointment of tractor driver based on agreement does not fall under 'Man Power Recruitment or Supply Agency' and set aside the demand of service tax.

M/s Syal & Associates, the appellants are engaged in the business of transportation of tractors by driving the tractors from the factory of M/s Punjab Tractors Ltd to the premises of dealers. As per the agreement, the tractors were to be driven by the drivers appointed by the appellants; consideration was paid to the appellants based on the rates fixed on a per kilometre basis; the appellants were required to ensure that the tractors were delivered in proper and good condition. 

The department believed the service rendered by the appellants was squarely covered by ‘Manpower Supply Agency Service’; accordingly, the show cause notices were issued to the appellants and were confirmed by the above-cited Orders-in-Original.

The appellant stated that the work undertaken by the appellants is not the supply of manpower. They were acted based on the contract for the transportation of the vehicles and they were paid for on a per kilometre basis.

It was viewed that the terms and contracts of the agreement show that the contract which the appellant and M/s. L & T have one for packing the meters manufactured by M/s. L & T in the premises of M/s. L & T. They do not have any contract for the supply of any number of persons.

The Tribunal viewed that packing is a process incidental or ancillary to the manufacture and therefore should be considered as part of manufacture as per Section 2(f) of the Central Excise Act. Packing of goods per se may not be manufactured but when it is done along with the manufacture in the factory of the manufacturer, packing is included in the process of manufacture.

While allowing the appeal, the two-member bench comprising Mr S S Garg, (Judicial) and Mr P Anjani Kumar, (Technical) held that the job work undertaken by the appellants does not fall under the category of ‘Manpower recruitment or supply agency service’ and set aside the demand and the penalty.

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