Custom, Excise & Service Tax Tribunal
Suresh Contracts vs Tiruchirapalli Ce&St on 3 May, 2023
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SZB, CHENNAI
REGIONAL BENCH : Division Bench 2
Service Tax Appeal Nos. 42265 - 42269 of 2013-DB
(Arising out of Order-in-Appeal No. 86,87,88 & 89/2013 dated
31.07.2013 and Order-in-Appeal No.78/2013 dated
30.07.2013 passed by the Commissioner of Customs & Central
Excise (Appeals), Tiruchirapalli).
1. M/s. Suresh Contracts
2. Ms. P. Indirani
3. Shri. S. Palanivelu
534, Ambal Street, Keelamedu,
Mandaiyur Post,
Pudukottai District-622 515.
4. M/s. Akila Contracts
C Block, FF 2,
Udayalakshmi Apartments
Srirangam,
Tiruchirapalli-620 006.
5. M/s. Suriya Contracts
HC 737/A, Anna Nagar,
Tiruchirapalli-620 026. Appellants
Vs.
The Commissioner of Central Excise & ST Respondent
No.1, Foulk‟s Compound, Anai Road, Salem-636 001.
APPEARANCE FOR APPELLANT : Ms. Charulatha.R, Advocate, Ms. Manasa.S, Advocate, FOR RESPONDENT : Shri R. Rajaraman, AC, Authorized Representative CORAM Hon'ble Shri P. DINESHA, MEMBER JUDICIAL Hon'ble Shri VASA SESHAGIRI RAO, MEMBER TECHNICAL Date of Hearing: 10.04.2023 Date of Pronouncement: 03.05.2023 FINAL ORDER Nos. 40331 - 40335/2023 2 Appeal Nos. ST/42265 - 42269/2013 Order: Per Hon'ble Shri Vasa Seshagiri Rao 1.1 The appellants herein M/s. Suresh Contracts, Ms. P. Indirani, Shri. S. Palanivelu, M/s. Akila Contracts, M/s. Suriya Contracts are the service providers to M/s. Livia Polymer Bottler Pvt. Ltd.,(Livia in short) who are engaged in the manufacture of pet bottles and jars. These five appeals have been filed by these service providers against the impugned orders dated 30.07.2013 and 31.07.2013 of the Commissioner of Customs & Central Excise (Appeals), Tiruchirapalli, confirming the demand of service tax, interest and imposition of penalty classifying their services under "Manpower recruitment or supply agency" service. As all the facts in these appeals are similar and the issue involved is identical, these appeals have been taken up together for disposal by this common order. The details of the notices issued and the orders of the lower adjudicating authorities, amount of tax and the interest demanded and penalties imposed, period involved etc. are summarized below in a tabular form for ready reference:-
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Appeal Nos. ST/42265 - 42269/2013 1.2 In terms of the written contracts entered into with Livia, all these appellants have provided the services of packing, loading & unloading and cleaning of the factory premises (specified jobs). The jobs entrusted to the appellants included collection of bottles, visual examination of the same, fixing the lids/closure, affixing labels, placing the bottles in a separate polythene cover and packing the bottles in the carton boxes. The appellants are also required to provide assistance for loading/unloading of raw materials and finished goods. It appears that the appellants were paid for the services rendered to Livia on rate-contract basis. The main features of the agreement are as under:-
a) The appellants have undertaken to provide specified jobs such as packing, loading and unloading, cleaning etc. at the premises of M/s. Livia [Preamble to the Agreement]
b) In consideration for carrying out the specified jobs, M/s.
Livia has agreed to pay the appellants on a rate-contract basis. Each item of the work performed by the appellants will be specified and consideration towards the same will be paid on a monthly basis on satisfactory completion of the jobs. (Clause 1)
c) Furthermore, the supervision and control over the workmen also remains with the appellants (Clause 10)
d) It is also agreed that M/s. Livia will have privity of contract with the appellants only (Clause 14). 1.3 In order to decide the issue involved in these appeals, it is necessary for us to analyze the terms of one of the written labour contract agreements entered into by the appellants with M/s. Livia, which is extracted below: -
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Appeal Nos. ST/42265 - 42269/2013 LABOUR CONTRACT AGREEMENT THIS AGREEMENT made at 1st day of January 2010, BETWEEN Management of M/s. Livia Polymer Bottler Pvt. Ltd., Mandiayur Salai, Mandaiyur -622 515, Pudukottai District (hereinafter known as the PRINCIPAL) and Mr. P. Suresh, S/o.S. Palanivelu, residing at Keelamedu, Mandaiyur Post, Pudukottai District-622 515 (hereinafter known as CONTRACTOR). WHEREAS the Principal is engaged in the business and manufacturing and selling of PET Bottles and Jars in the factory owned by him.
AND WHEREAS the Principal is desirous of giving out the works relating to Packing, Loading & Unloading, and Cleaning of the factory premise, et., AND WHEREAS the Contractor has expressed his desire to undertake such works to be done to the satisfaction of the Principal by himself or by engaging persons by him for a consideration specified subject to the terms and conditions stipulated hereunder: 5
Appeal Nos. ST/42265 - 42269/2013 1.4 The issue involved in all these appeals pertains to whether the activities undertaken by the appellants are taxable under heading "Manpower Recruitment or Supply Agency service" as defined under Section 65(68) of the Finance Act, 1994. It reads as follows:-
"Manpower recruitment or supply agency" means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person".
The assertion of the department is that the appellants are engaged in the supply of manpower as there is an employee-employer relationship between the appellants and the persons carrying out the specified works, and as they are complying with various labour laws, so are liable to pay service tax on the consideration received on Manpower supply service. The contract is for providing temporary supply of labour which is its real intention and the 6 Appeal Nos. ST/42265 - 42269/2013 ingredients of the supply of manpower service as defined under the Finance Act are satisfied in these cases.
1.5 In the impugned order reliance is placed on the decision rendered in the case of Jivanbhai Makwana Vs. CCE, Ahmedabad - 2010 (18) STR 206 (Tri.-Ahmd.), where the assessee was entrusted with the jobs of keeping the premises clean, cleaning of bathrooms and toilets, providing drinking water and supply of coffee and tea to the staff, providing services of loading and unloading without specifying the number of labourers to be provided but only items of work to be carried out, the co-ordinate CESTAT Bench had held that the impugned contract was to be considered as labour contract for supply of manpower. Similarly, in the case of Renu Singh & Co. Vs. CCE - 2007 (7) STR 397, it has been held by the CESTAT, Bangalore that supplying labourers for helping in mechanized loading of cement would not be classifiable under cargo handling service but under the category of manpower recruitment or supply service. Similarly, in Suhas Transports - 2010 (19) STR 143 (Tri.- Ahmd.), the services of shifting/issue of raw materials, intermediate and consumables, shifting of finished/intermediate goods, shifting/issue of containers/packing materials, stickering etc. in the service receiver‟s premises was held to fall under Manpower recruitment or supply service as the true nature of contract is supply of manpower.
2.1 During the hearing and also in grounds of appeal, the learned Advocate has submitted that the issue involved in these appeals is no more res integra and the activities undertaken by these appellants are not taxable under "Manpower recruitment or supply Agency service", as they are engaged in carrying out specified works 7 Appeal Nos. ST/42265 - 42269/2013 such as packing, loading & unloading and cleaning etc., which per se would not amount to supplying any manpower to M/s. Livia. Our attention has been drawn to the Board‟s Circular No. 190/9/2015-ST dated 15.12.2015, wherein the Board has explained the scope of job work vis-à-vis manpower supply services. The Circular, after considering a similarly worded agreement as above, has clarified that the activity is not liable to tax under the heading manpower supply services. A comparison between the clauses provided in the Circular and the clauses of the Agreement between the appellant and M/s. Livia is provided herein below:-
S.No. Clauses as per the Circular Relevant Clause in the Agreement 1 The Contractor is engaged for undertaking specific jobs. Preamble and clause 2 2 The Contractor is at liberty to decide the number of Clause 4 workers.
3 The job worker may undertake job in his premises or in Preamble the premises of the service-receiver.
4 Value of service is payable on per piece basis Clause 1 5 Service provider is liable to compensate the service Clause 1,2, 11 recipient if the work is not as per standard form 6 In case the work is executed by service provider at the Clause 11 site of service recipient, the service provider would indemnify the service receiver of any loss t infrastructure 7 The employee deployed for the assigned job would be Clause 10 under the control/supervision of the service provider Learned Advocate has further submitted that the issue involved in these appeals is covered by several decisions of the Tribunal wherein it was held that where agreements are entered for execution of lump-sum work such as packing, loading & unloading and cleaning on per piece rate basis, the same cannot be held as Manpower supply services. Reliance in this regard is placed on the following decisions:-
i) Donypolo Udyog Ltd. Vs. CCE & ST, Indore 2023 (3) TMI 539 - CESTAT, New Delhi.
ii) Mr. G. Sakthivel & Ors. Vs. CGST & CE, Madurai 2020 (5) TMI 909 - CESTAT, Chennai
iii) K. Balakrishnan & Anr. Vs. CGST & CE, Madurai 2021 (9) TMI 181 - CESTAT, Chennai 8 Appeal Nos. ST/42265 - 42269/2013
iv) Arul Prakasam & Ors. Vs. CGST & CE, Chennai 2021 (8) TMI 1063 - CESTAT, Chennai
v) G. Ramakrishnan & Ors. Vs. CGST & CE, Chennai 2019 (3) TMI 42 - CESTAT, Chennai
vi) S. Balasubramani & Anr. Vs. CCE, Trichy 2019 (3) TMI 1392 - CESTAT, Chennai
vii) CCE & ST Vs.Godavari Khore Cane Transport Co. P. Ltd.
2015 (3) TMI 483 - Bombay HC.
2.2 It is also submitted by the learned Advocate that the demand of service tax under "Manpower supply services" is not sustainable as the final deliverable in a manpower supply agreement is supply of manpower. The contractual obligations would end once the manpower is mobilized and supplied. Where an agreement is for executing specific works without fixing any specific number of personnel, such agreements cannot be said to be for supply of manpower. The real test to identify the arrangement for manpower supply is to see which party holds the control and supervision over the personnel. In the instant case, the control and supervision over the workmen supplied clearly rests with the appellants and reliance in this regard is placed on the decision of M/s. Shailu Traders Vs. CCE, Indore - 2018 (3) TMI 1282 -CESTAT, New Delhi. The learned Advocate has further submitted that when the agreement expressly states that the control and supervision over the works carried out by the personnel rests with the appellants, the impugned orders cannot assume that employees work under the control of M/s. Livia. The consideration for carrying out the specified works is on piece-rate basis in all these appeals and as such it cannot be said to be supply of manpower services. The workmen are employees of the appellants and the appellants discharge various conditions of employment in terms of the labour laws and it cannot be said that 9 Appeal Nos. ST/42265 - 42269/2013 the appellant is engaged in the supply of manpower. The agreement is for carrying out the specified works by the appellant himself or by engaging required workmen and not for supply of manpower. 2.3 Learned Advocate has also submitted that no penalty is imposable in these cases, as the issue involves interpretation of law relying upon the decisions rendered by the Chennai Bench of the Tribunal in the case of Mr. G. Sakthivel & Ors. Vs. CGST & CE, Madurai -2022 (5) TMI 909- CESTAT, Chennai and K. Balakrishnan & Anr. Vs. CGST & CE, Madurai - 2021 (9) TMI 181 - CESTAT, Chennai. It has been further submitted that extended period is not invokable in these cases, as the issue involves interpretation of law relying on the decision in the case of International Merchandising Co, LLC Vs. CST, New Delhi - 2022 (67) GSTL 129 (SC).
3. Learned DR Shri R. Rajaraman has argued for the Revenue. He has reiterated the findings in the impugned orders. He has contended that it is evident from various terms of the agreement that the real intention of the contract was supply of manpower but the contract was artificially incorporated with certain conditions to lend the contract an attire of a work and the contract was for providing temporary supply of manpower only who were engaged for a specified period or for completion of particular projects or tasks. Considering the ingredients of the definition of taxable service "Manpower recruitment or supply Agency" and obligations undertaken under different labour and welfare laws by the appellants would indicate that the services rendered by the appellants would be coming under manpower supply service. Further, he has drawn our attention to the decision of the Hon‟ble Apex court in the case of Adiraj Manpower Services Pvt. Ltd. Vs. CCE, Pune-II - 2022 (58) 10 Appeal Nos. ST/42265 - 42269/2013 GSTL 137 (S.C.), wherein services provided by the contractor for supply of skilled and unskilled manpower for carrying out activities like material handling, felting, pouring and supply of cast machine parts and painting within the factory premises and where consideration was settled as per the schedule of rates agreed upon on the basis of quantum of specific works performed as a contract for supply of labour. He has asserted that the demands raised are to be sustained.
4. We have considered the submissions made by both sides and also perused the records as available in all these appeals. 5.1 The main issue involved in all these appeals is whether the services rendered by the appellants would fall within the category of "Manpower recruitment or supply Agency" service or not? 5.2 A perusal of the labour contract entered into between the appellants and M/s. Livia indicate that M/s. Livia has agreed to pay the contractor on rate contract basis which will be determined from time to time on the basis of the nature of the work executed. Supervision and control over the work of the personnel employed by the contractor shall be with the contractor himself or his representatives, M/s. Livia will not in any manner supervise the work of the employees of the appellants, and the appellants are responsible for all the acts and conduct of the workmen and if any loss, costs should be reimbursed to M/s. Livia. The principal will have the privity of contract with the appellants and he would be giving instructions to the contractor only and would not have anything concerned with the workmen of the appellants and the appellants are free to work anywhere else and also undertake any 11 Appeal Nos. ST/42265 - 42269/2013 work provided he remains responsible for execution of the specified jobs entrusted.
5.3 A plethora of decisions by various benches of the Tribunal holding that where the contracts provide for payment of services on piece rate basis and where the supervision over the workmen employed remains with the contractors, where the employee- employer relationship exists between the contractor and his workmen supplied, the services are not classifiable under "Manpower recruitment or Supply Agency service". We find that the decisions rendered in the following cases are squarely applicable to the facts of these appeals.
i) Divya Enterprises Vs. CCE, Mangalore 2010 (19) STR 370 (Tri.Bang.)
ii) Ritish Enterprises Vs. CCE, Mangalore 2010 (18) STR 17 (Tri.-Bang.)
iii) Samarth Sevabhavi Trust Vs. CCE, Aurangabad 2013 (8) TMI 218 - CESTAT, Mumbai
iv) Alfa Engineers Vs. CCE & C, Pune 2016 (4) TMI 844 - CESTAT, Mumbai
v) Shailu Traders Vs. CCE, Indore 2018 (3) TMI 1282 - CESTAT New Delhi 5.4 On a careful consideration of the agreements between the contractors and M/s. Livia, we find that specific jobs were assigned to the appellants for execution of the work of packing, loading, unloading and cleaning etc. It can be seen from the invoices issued by the appellants, the service charges were paid on the basis of the quantum of work handled. A copy of one of the labour bills issued by the appellant is extracted below:-
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Appeal Nos. ST/42265 - 42269/2013 5.5 We find that regarding Revenue‟s reliance on the decision rendered in Adhiraj Manpower Services Pvt. Ltd Vs. CCE, Pune-II (supra) is not applicable since the same is distinguishable, as the facts involved are different and the issue involved therein was the appropriate classification of the services of the appellant whether under "Job work" or under "Manpower Recruitment or Supply Agency" service. The issue before the Court was whether the appellant is a Job Worker within the meaning of the exemption Notification dated 20.06.2012 or is merely a supplier of contract labour for work of the establishment. Hon‟ble Apex court has 13 Appeal Nos. ST/42265 - 42269/2013 concluded after going through the agreement that the appellant is not a job worker due to conspicuous absence of any reference to the following:-
i) The nature of the process of work which has to be carried out by the appellants;
ii) Provisions for maintaining (a) the quality of work; (b) the nature of the facilities utilized; or (c) the infrastructure deployed to generate the work;
iii) The delivery schedule;
iv) Specifications in regard to the work to be performed;
and
v) Consequences which ensue in the event of a breach of
the contractual obligation.
Whereas in all these appeals, the service providers were paid consideration on the basis of the quantum of work executed and not on the basis of number of labourers supplied. The services of the labourers were supervised by the appellants themselves or by their supervisors. Employee and employer relationship exists between the appellants and their workmen. Compliance of various regulatory labour and other laws governing contract labour is the responsibility of the contractors.
5.6 At this juncture, we find it is necessary to refer to the decision of the Hon‟ble Supreme Court in the case of Super Poly Fabriks Ltd. Vs. CCE, Punjab - 2008 (10) STR 545 (S.C.), which laid down the ratio as under:-
"There cannot be any doubt whatsoever that a document has to be read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive." 14
Appeal Nos. ST/42265 - 42269/2013
6. On the basis of a detailed analysis of the contracts entered into and other connected records in these appeals, we are of the considered view that the tax demands raised under „Manpower Recruitment or Supply Agency‟ service cannot sustain and hence, the impugned orders are liable to be set aside and we do so accordingly. As we have disposed all the appeals on merits, no findings are required to be recorded on the issues of invoking extended period and imposition of penalty.
7. All these appeals are allowed with consequential reliefs, if any, as per law.
(Order pronounced in the Open Court on 03.05.2023 ) (VASA SESHAGIRI RAO) (P. DINESHA) MEMBER TECHNICAL MEMBER JUDICIAL BB