CESTAT Sets aside Demand of Service Tax under “Manpower Recruitment Supply Agency Service” in absence of Supply of Any Labourers [Read Order]

The Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) set aside the demand of service tax under “Manpower Recruitment Supply Agency Service” in the absence of supply of any labourers. The bench found that the department failed to prove that there was a supply of manpower.

Arunachalam,the Appellant  stated that the nature of work was not within the ambit of the above Service and, at the most, the Service could be one under “Business Auxiliary Service” (BAS). The Appellant contended that he is eligible for the benefit of Notification No. 8/2005-ST dated 01.03.2005, and that the benefit of threshold exemption should also have been extended to him. It was contended that for the year 2008–09 threshold exemption limit was Rs.10 lakhs; the ledger account reflected the taxable value of Rs.12,88,720/-, after extending the benefit of threshold exemption of Rs.10 lakhs, the taxable value would be only Rs.2,88,720/- on which the tax would be Rs.45,040/- and hence, the denial of the threshold exemption was not in accordance with law. 

Per contra, the Departmental Representative relied on the findings of the authorities below. It is contended, in the synopsis filed before us by the  Advocate during hearing, that M/s. Aruna Alloys Steels Private Limited in their letter dated 24.12.2010 had indicated that the Appellant was engaged as a job worker to undertake various activities reflected in the above letter.

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The Tribunal found that there is a reference to the said letter in the OIO at para 14.4 but unfortunately, the Adjudicating Authority has not given finding on this factual aspect. Hence, it is to be accepted that the Appellant undertook various activities like grinding, RT upgradation, gouging, machining, etc., which were claimed to be used as components of the boilers used in the thermal/nuclear power plants and therefore, the said activities undertook by the appellant would amount to “manufacture” as claimed by the Appellant. By this, therefore, the authorities below have erred in ignoring this specific plea which otherwise would have entitled the appellant to the benefit of Notification No. 8/2005 supra.

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A two mmeber bench of  P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member(Technical) held that “Since there is no supply of any other labourers to M/s. Aruna Alloys Steels Private Ltd. and therefore, the allegation as to the “Manpower Recruitment Supply Agency Service” may not survive.”

While allowing the appeal, the bench held that  the Revenue has not proved its case to fasten the liability of Service Tax on the above head. 

To Read the full text of the Order CLICK HERE

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M/s. Arunachalam vs Commissioner of GST and Central Excise , 2025 TAXSCAN (CESTAT) 246 , Service Tax Appeal No. 40368 of 2015 , 10 January 2025 , Shri M. Kannan , Shri Sanjay Kakkar