Case Law Details
Hitech Industries Vs C.S.T.-Service Tax (CESTAT Ahmedabad)
Introduction: In a significant decision, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Ahmedabad has ruled in favor of Hitech Industries against the Commissioner of Service Tax (C.S.T.). The case revolves around whether Hitech Industries’ job fabrication service can be categorized under “Manpower Recruitment or Supply Agency Service,” thereby making it subject to service tax. The tribunal found in favor of the appellant, setting aside the demand for service tax.
The Controversy: Hitech Industries was engaged in job fabrication for their service recipient, charging customers either on a per kg or per piece basis. The central issue was whether this activity should fall under the category of “Manpower Recruitment or Supply Agency Service,” and thus be liable for service tax.
Arguments Presented: Shri Dhaval K Shah, the Learned Counsel representing Hitech Industries, argued that the company had not provided manpower but had undertaken job fabrication. The counsel cited various judgments to support the case. Shri Ajay Kumar Samota, the Learned Superintendent (AR) representing the Revenue, reiterated the findings of the impugned order, claiming the appellant’s services should be classified as manpower supply.
Tribunal’s Examination: The tribunal meticulously examined the invoices and a letter from the service recipient. It was noted that Hitech Industries did not provide manpower; instead, they were solely engaged in job fabrication. There was no evidence to indicate that the service recipient had control or supervision over the manpower for accomplishing their tasks.
Key Takeaways: The tribunal emphasized that the nature of the work was job-based and not dependent on the number of manpower or man-hours. Thus, the activity cannot be categorized under “Manpower Recruitment or Supply Agency Service.” Interestingly, the tribunal suggested that the service could be classified under “Business Auxiliary service” but noted that since the demand was not raised under this category, it could not be sustained. The tribunal also noted that the service recipients are paying excise duty on their final product, further exempting Hitech Industries’ activity.
Citing of Precedents: The counsel for Hitech Industries cited numerous judgments that supported the appellant’s case, strengthening the argument that job fabrication service does not equate to manpower recruitment or supply agency service.
Conclusion: The CESTAT Ahmedabad ruling provides clarity on the classification of services related to job fabrication. It clarifies that unless there is a specific supply of manpower that is charged based on the number of personnel or wages, the service cannot be categorized as “Manpower Recruitment or Supply Agency Service.” This is a landmark judgment that could have implications for similar cases, thereby assisting companies in better understanding their service tax liabilities.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is whether the appellant’s activity of carrying out job of fabrication for their service recipient with the help of the labour of the appellant is classifiable under Manpower Recruitment or Supply Agency Service or otherwise.
2. Shri Dhaval K Shah, Learned Counsel appearing on behalf of the appellant submits that the appellant has not provided the manpower, they have undertaken the job of fabrication of various types and they have charged to their customers as per KGs or per piece basis. Therefore, the activity of appellant does not fall under the category of Manpower Recruitment or Supply Agency Service. He also referred to the invoice copies and a letter from the service recipient, to submit that as per these documents it is clear that the appellant have not provided the Manpower Recruitment or Supply Agency Service. He placed reliance on the following judgments:-
- Ritesh Enterpeises Vs. CCE, Bangalore – 2010 (18) STR 17 (Tri.Bang)
- Divya Enterprises Vs. CCE, Manglore – 2010 (19) STR 370 (Tri.- Bang)
- S Associates Vs. CCE , Banglore- 2010 (19) STR 438 (Tri.Bang)
- Damodarareddy Vs. CCE, Tirupathi – 2010 (19) STR 593
- Rameshchandra C. Patel Com of ST – 20112 (25) STR 417
- M/s. Delphi Automotive Systems Vs CCE- 2004 (163) ELT 47
- M/s. Manglam Cement Ltd Vs. CCE – 2004 (163) ELT 177
- General Pharmaceuticals P Ltd Vs. CCE – 2007 (218) ELT 86
- M/s Marsha Pharma P Ltd Vs. CCE – 2009 (248) ELT 687 (Tri.Ahmd)
- P. T. Education & Training Services Vs. CCE – 2010 (19) STR 818 (Tri.Del)
3. Shri Ajay Kumar Samota, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the records. We find that the revenue has classified the service of the appellant under Manpower Recruitment or Supply Agency Service and demanded the service tax only on the ground that in some of the invoices the appellant has mentioned the labour charges. To understand the activity of the appellant it is necessary to go through the documents related to the activity therefore, the invoices and letter of service recipient are scanned below:-
4.1 From the above invoices and the letter given by the service recipient it is clear that the appellant have not provided the manpower to the service recipient. It is not a case that the service recipient has control or supervision over the manpower for getting their job done as per their direction. It is clear that the appellant had been assigned the job of fabrication by the service recipient and the appellant have charged on the quantum of job basis and not on the basis of number of manpower or man hours. Therefore, irrespective of number of manpower or man hours involved in the job to be carried out, the appellant is under obligation to complete a job of fabrication as assigned to him, therefore, in this arrangement it cannot be said that the appellant have provided the service of Manpower Recruitment or Supply Agency Service.
4.2 Needless to say that for performing any job manpower is required but that itself does not decide that the assessee has provided the manpower. The important aspect to be seen is that whether there is a supply of manpower alone without concern of any job with the manpower supplier and the charges of the same has to be strictly on the basis of number of manpower and the wages to be paid to them which is not the fact in the present case. Therefore, as per the arrangement between the appellant and service recipient as evident from the above documents the service of the appellant does not fall under the category of Manpower Recruitment or Supply Agency Service however, the same is classifiable under ‘Business Auxiliary service’ under the sub category of ‘production or processing on behalf of the client. Since demand was not raised under ‘Business Auxiliary service’ hence, the demand will not sustain for this reason alone. Moreover, it is the submission of the appellant that their service recipient are paying excise duty on their final product for this reason the appellant’s activity are otherwise exempted under Notification No. 08/2005-ST.The judgments relied upon by the appellant directly support the case of the appellant.
5. As per the discussion and finding given herein above, we are of the view that impugned order is not sustainable, hence, the same is set aside. Appeal is allowed.
(Pronounced in the open court on 29.08.2023 )
