Arranging Cane-Harvesting Workers for Farmers Without Control is Mere Facilitation, Not Taxable as Manpower Supply Service: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that arranging cane-harvesting workers for farmers without control or an employment relationship is only facilitation and not taxable as manpower supply service.

MRK Co-Operative Sugar Mills Ltd., the appellant, is engaged in the manufacture of sugar and molasses and also supports registered cane growers by arranging gangs of workers for harvesting and transporting sugarcane.

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The department viewed these activities as manpower recruitment or supply agency service and issued a show cause notice dated 21.02.2013 demanding service tax of Rs. 33,325/- along with interest and penalty. The Assistant Commissioner confirmed the demand and the Commissioner (Appeals) upheld the order. The appellant then approached the Tribunal.

The appellant’s counsel argued that the mill never supplied manpower, raised invoices, or received payments for services. Farmers themselves engaged the gang leaders or harvest workers, and when they could not find labour, the mill only provided names for their convenience.

They further argued that there was no master-servant relationship between the mill and the workers. The counsel relied on earlier CESTAT decisions such as Arignar Anna Sugar Mills v. CCE, Kallakuruchi Co-operative Sugar Mills v. CCE, and Nadippisai Pulavar K.R. Ramasamy Co-op Sugar Mill v. CCE, which held that similar arrangements did not amount to manpower supply.

The revenue counsel argued that the mill had arranged for workers and recovered costs from the farmers, which brought the activity under manpower supply service. The department supported the findings of the lower authorities.

The two-member bench comprising Ajayan T V (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the labourers and gang leaders were independent service providers who fixed their charges directly with the farmers. The mill had no control over them, and there was no employer-employee relationship.

The tribunal pointed out that the mill only facilitated the farmers by giving contact details of gang leaders and adjusting payments in accounts.

The tribunal explained that in similar cases, it had already held that such facilitation cannot be classified as manpower supply service. Since the appellant’s role was limited to helping farmers and not supplying labour, the demand of service tax, interest, and penalty could not be sustained. The appeal was allowed with consequential relief.

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