Punjab Roadways Providing Transport Services to General Public Not a Manpower Recruitment or Supply Agency: CESTAT [Read Order]

Three appeals, i.e. one appeal filed by the Revenue and other two appeals filed by the assessee, are directed against a common impugned order dated 22.02.2012 passed by the Commissioner of Central Excise & Service Tax, Chandigarh-I.

By the impugned order, the Commissioner confirmed the demand of service tax of Rs.5,04,49,559/- for the normal period (i.e. 01.04.2009 to 31.03.2010) under Section 73 of the Finance Act, 1994 along with interest under Section 75 of the Act in respect of SCN dated 07.10.2010 vacated the remaining demand of Rs.17,92,27,587/- for the extended period (i.e. 01.04.2005 to 31.03.2009) in respect of SCN dated 07.10.2010.

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Three SCNs were issued to M/s Punjab Roadways (‘the assessee’) on common allegations that the assessees had provided services in the category of ‘Manpower Recruitment or Supply Agency’s Services’ to M/s Punjab State Bus Stand Management Company Ltd (‘PUNBUS’).

The Revenue Authorities received intelligence that the assessee were engaged in providing services in the category of ‘Manpower Recruitment or Supply Agency’s Services’ to PUNBUS and thereafter, initiated enquiry into the matter. In the course of enquiry on the scrutiny of the records of PUNBUS for the various financial years, it came to light that the assessee had incurred expenditure under the accounting head ‘Operational Charges’ which were paid to the Director, State Transport, Govt of Punjab.

On request from the Revenue Authorities, PUNBUS deputed a representative on 09.12.2009 to attend the office of the Inquiry Officer. The representative of PUNBUS informed the Inquiry Officer that the ‘Operation Charges’ were the charges which were paid to the assessee on account of hiring of manpower from the assessee. Further, enquiry into the matter with PUNBUS and the assessee revealed that the assessee were not registered with the jurisdictional Revenue Authorities for the payment of service tax on services in the category of ‘Manpower Recruitment or Supply Agency’s Service’ which is a taxable service under the Finance Act, 1994.

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The term ‘Manpower Recruitment or Supply Agency’ has been defined under Section 65(68) of the Act and the service in relation to ‘Manpower Recruitment or Supply Agency’s Service’ is defined under sub-clause (k) of clause (105) of Section 65 of the Act. Further, it was also alleged that the assessees were a commercial organization and therefore, were covered within the definition of the term ‘Commercial Concern’ as was contained in definition in Section 65(68) prior to the amendment of Section 65(68) w.e.f. 16.05.2008.

After the amendment of definition of the term ‘Manpower Recruitment or Supply Agency’, the term ‘Commercial Concern’ has been replaced by the term ‘Any Person’, therefore, the assessees are covered under definition of the term ‘Manpower Recruitment or Supply Agency’.

The Govt of Punjab got incorporated under the Companies Act, 1956 a company named Punjab Bus Stand Management Company Limited (‘PUNBUS’) which is wholly owned by the Govt of Punjab. The PUNBUS started operation in May, 2006 on the existing route permits of the Punjab Roadways. It was also decided by the Govt of Punjab that the staff of the Punjab Roadways was to be deployed with PUNBUS on assignment basis without any additional remuneration or deputation allowance.

The General Manager of the depots of Punjab Roadways, senior staff and other staff were designated as officers/staff of PUNBUS in addition to their duties in Punjab Roadways. The salaries of the staff of Punjab Roadways are still being paid from the government treasury but are being reimbursed by the PUNBUS.

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After following the due process, the Commissioner has passed the impugned order (as cited above in para 1.1). However, being aggrieved by dropping the demand for extended period, The Revenue has preferred the appeal bearing no. ST/621/2012 and against the confirmation of demands, the assessees have preferred the appeals bearing nos. ST/699/2012 & ST/51802/2014 before us.

The assessee, i.e. M/s Punjab Roadways, were providing the services of Manpower Recruitment or Supply Agency’s Service to PUNBUS, but were not registered with the department and also were not paying the service tax on the said services and when the enquiry was conducted then it was found by the Revenue that the assessee was providing the said services from the period 2005-06 onwards and they have suppressed the material facts from the Revenue; therefore, by invoking the extended period, the SCN dated 07.10.2010 was issued.

The Authorized Representative further submitted that the Commissioner has wrongly held that the Revenue has not been able to establish any of the ingredients provided in proviso to Section 73(1) of the Act. He submits that the Revenue has established that is only by the enquiry conducted by the Revenue that non-payment of service tax was detected otherwise it would have gone unnoticed and therefore, the assessees have suppressed the material facts with intent to evade the service tax.

On the other hand, the learned Counsel for the assessee defended the dropping of the demand for the extended period and further submits that the learned Commissioner has given a detailed finding after considering the proviso to Section 73(1) of the Finance Act, 1994 as well as the precedent decisions on the issue.

He further submits that in order to invoke the extended period, the department has to establish any of the essential ingredients as provided under Section 73(1) of the Act for invoking the extended period of limitation i.e. fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made thereunder with intent to evade payment of service tax, whereas in the present case, the department has not established the same.

It was observed that there is nothing in the show cause notice which suggests that there was more than mere inaction on the part of the Noticees when they failed to pay the service tax. Further, no evidence has been adduced to show that the Noticees had the knowledge that they were liable to pay the service tax and they deliberately avoided to pay the service tax.

The Noticees have all the time contested the liability to pay the service tax. In such a situation it is unfair and illegal to saddle them with any liability beyond the normal period of limitation of one year. In the normal period of limitation the liability is strict and is enforceable without any fault or mala fide on the part of the service provider.

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The assessee further submitted that the SCNs, issued to M/s Punjab Roadways/assessees, are not a valid notice because Punjab Roadways is only a wing of State of Punjab working under the Punjab State Transport Corporation and the SCNs should have been issued to the State of Punjab and not to M/s Punjab Roadways. It was only the State of Punjab which was the employer of the alleged manpower/employees who were allegedly made to perform duties with the PUNBUS, therefore, only State of Punjab to be held as ‘chargeable to service tax’ as a service provider; whereas the SCNs in question were not issued/served to the State of Punjab.

Counsel further submitted that the assessee-Punjab Roadways were not engaged in supply of manpower to any other person and they had assigned the duties of their certain employees to the PUNBUS which is wholly owned by the Govt of Punjab; the officers/employees of the assessees were designated as officers/employees of the PUNBUS in addition to their duties in Punjab Roadways and salaries of the officers/employees were paid from the government treasury.

The assessee-Punjab Roadways was performing statutory function and therefore, they do not fall in the definition of “Manpower Recruitment or Supply Agency’s Service” as defined under Section 65(68) of the Act.

A two member bench of S. S. Garg, Member (Judicial) and P. Anjani Kumar, Member (Technical) held that assessee-Punjab Roadways, being a transport department of the State of Punjab, is performing statutory function to provide transport services to the general public and is not a manpower recruitment or supply agency.

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