Service Tax Demand on Manpower Recruitment and Supply Agency Service not Valid in Absence of Evidence of Supply of Manpower and its details: CESTAT [Read Order]

In a significant case, the Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax demand on manpower recruitment and supply agency service is not valid in the absence of evidence of supply of manpower and its details.

M/s S.A. Engineering Works, the appellant challenged the impugned Order- passed by the Commissioner (Appeals), whereby the demand of service tax of Rs. 1,27,404/- for the period July 2005 to February 2007 has been confirmed.

During the audit of M/s Flexican Bellows & Hoses Pvt. Ltd., Vadodara, it was noticed by the revenue that the Appellant have provided manpower/ Labour supply services to them. However, the appellant failed to obtain service tax registration during the period July 2005 to Feb. 2007 of providing services and failed to pay service tax in the amount of Rs. 12,49,057/- received from M/s Flexican Bellows.

A Show Cause notice dated 28.05.2009 was issued to the Appellant demanding a Service Tax of Rs. 1,27,404/- along with interest and seeking to impose penalties under Sections 77 & 78 of the Finance Act, 1994.  

In adjudication, the demand was confirmed by the adjudication authority vide OIO dated 24.12.2009. Being aggrieved with the OIO appellant filed an appeal before the Commissioner (Appeals), who vide impugned order-in-appeal dated 22.02.2011 rejected the appeal of the appellant and upheld the Order passed by the Adjudicating authority.  Hence the present appeal filed by the Appellant. 

Ms. Shamita Patel with Mr. Rahul Gajera counsel appearing on behalf of the Appellant submitted that during the period July 2005 to February 2006 the Appellant had carried out the production of bellows on Job work basis for the principal manufacturer Flexican Bellows & Hoses Pvt. Limited in the premises of the Principal manufacturer. 

It was viewed that M/s Flexicon Bellows & Hoses Pvt. Ltd. has entered into an agreement with the appellant for the manufacture of Flexicon Bellow on a job-work basis. The appellant was paid for carrying out such activities. The workmen deployed by the appellant for carrying out such activities were under the supervision and control of the appellant.

The ultimate manufacturer, who entrusted the job to the appellant was in no way concerned with the workmen deployed by the appellant. It was also noticed that over and above paying the amount for manufacturing activities undertaken by the appellant on a job-work basis, the said service receiver had not paid any specific price to the workmen/ Labour deployed by the appellant.

The documents submitted by the appellant indicate a lump sum charge for the work undertaken by them. There is no evidence of the supply of manpower with details of the number and nature of manpower, duration and other conditions for such supply.

“In the absence of such evidence, the job work charges cannot be taxed under “Manpower Recruitment and Supply Agency Service”. Hence, we are of the considered view that the adjudged demand confirmed on the appellant cannot be sustained.”, the two-member bench comprising Mr Ramesh Nair, Judicial Member and Mr C L Mahar, Technical Member.

While allowing the appeal, the CESTAT set aside the impugned order.

To Read the full text of the Order CLICK HERE

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