Top Stories Intermittent works executed by Co-operative Societies not fall under Man Power Recruitment or Supply: CESTAT upholds Orders set aside Service Tax Demand [Read Order] The CESTAT ruled that intermittent works executed by co-operative societies did not fall under manpower recruitment or supply By Yogitha S. Yogesh – On January 2, 2024 12:32 pm – 3 mins read The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) observed that intermittent works executed by Co-operative Societies did not fall under manpower recruitment or supply. The Tribunal upheld the order which set aside the demand of service tax on respondents. The department against the impugned Orders wherein the Commissioner (Appeals) dropped the proceedings.
The services provided by all three Respondent societies, M/s. Jagarnathpur DPL Co-Operative Limited, M/s. Seva Shramik Sahyog Samiti Limited and M/s. Nachiuatu VSSS Limitedare similar and was provided to M/s. Heavy Engineering Corporation Limited, Ranchi (‘HEC’). During the material period, the respondents executed various jobs entrusted to them in the plants of HEC, as per the Work Orders issued by HEC, on principal to principal basis. The Department claimed that the services rendered by the Respondents were ‘Manpower Recruitment or Supply Agency’s services, as defined under Section 65 (68) of the Finance Act, 1994 read with Section 65 (105) (k) ibid, and demanded service tax.
The Respondents submitted that as per the relevant work orders such services were not Manpower Recruitment or Supply Agency’s service and hence they are not liable to pay service tax. The three Respondent societies were issued SCNs and all the SCNs were adjudicated by the Additional Commissioner confirming the demand of service tax under the ‘Manpower Recruitment or Supply Agency’ service along with interest and penalties. On appeal, the Commissioner (Appeals) vide the impugned Orderinallowed the appeals by holding, inter alia, that the contracts were not person-based, but job-based. The Commissioner (Appeals) held that the demand for service tax under the category of ‘Manpower Recruitment or Supply Agency’ service is not sustainable. The Respondent submitted that the Work Orders reveal that the societies executed the jobs as contractors by engaging the workers from their roles and it further reveals that the job was mentioned in terms of quantity and not based on several workmen supplied or engaged. The rate was fixed per Ton basis.
The agreements as per the Work Orders did not require or specify the number of workers to be employed and the number of days for which the workers would be engaged. It is for the respective Respondent societies to execute the jobs, specified in the Work Orders by deploying as many numbers of workers as per its convenience and discretion. As the Principal Company, HEC was interested only in the execution of the job entrusted to the Respondent societies at the agreed rates and also within the specified time frame. HEC as a responsible Public Sector Company, apart from making a profit has the social obligation to ensure that the workers employed by the contractors in their factory are not subjected to any exploitation and they are paid their legitimate dues which they are entitled to appropriately and also in time.
The Principal Company in the discharge of its social commitment and obligation has ensured that the workers, working for them, although in the role of the Respondent societies, are not exploited and the provisions of the Contract Labour (Regulations and Abolition) Act, 1970 are complied with. The wage bills of the workers are not only properly prepared as per the Minimum Wages Act, but also paid and their CPF, ESI etc. are properly deducted and deposited to the respective authorities.
It was argued that the Commissioner(Appeals) has rightly understood the scope and ambit of the Work Orders issued by HEC and the nature of work undertaken by the societies, and set aside the Orders-in-Original confirming the demands. The Work Orders does not specify anywhere the number of workers to be deployed by the Respondent societies to execute the work awarded to them. The Work Orders only provide that the Respondent societies as per the contract were under obligation to accomplish the work by deploying their manpower. As per Section 65(68) the “Manpower Recruitment or Supply Agency Services” means any person providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person, and Section 65(105)(k) defines the taxable services for providing such services. From the above definitions, it is rather clear that it envisages a supply of labour which can be classified as “Manpower Recruitment or Supply Agency Services”.
A two-member bench comprising of Shri R Muralidhar, Member(Judicial) and Shri K Anpazhakan, Member(Technical) observed thatthe impugned order has rightly dropped the demands under Manpower Recruitment & Supply Agency service and rejected the appeals filed by the Appellant department. To Read the full text of the Order CLICK HERE