Custom, Excise & Service Tax Tribunal
Up Bridge Corporation vs Ce & Cgst Meerut-I on 7 November, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70769 of 2018
(Arising out of Order-in-Appeal No.RJ/36/2018 dated 19/03/2018 passed by
Commissioner (Audit) Customs, Central Goods & Service Tax, Noida)
M/s UP Bridge Corporation, .....Appellant
(218, PWD Colony, Civil Lines, Meerut)
VERSUS
Commissioner of Central Excise, Meerut ....Respondent
(Mangal Pandey Nagar, Meerut)
APPEARANCE:
Shri S.K. Mathur, Advocate for the Appellant
Shri Sarweshwar T. Khairnar, Authorised Representative for the
Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70176/2023
DATE OF HEARING : 27 September, 2023
DATE OF PRONOUNCEMENT : 07 November, 2023
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal
No.RJ/36/2018 dated 19/03/2018 passed by Commissioner
(Audit) Customs, Central Goods & Service Tax, Noida. By the
impugned order Commissioner (Appeals) has upheld the Order-
in-Original No.54/ADDL.COMMR./MRT/2017 dated 28.02.2017.
1.2 Additional Commissioner by the Order-in-Original has held
as follows:-
"ORDER
i. I confirm demand of service tax of Rs.72,73,695/- (Rupees
Seventy two Lac Seventy three Thousand Six Hundred
Ninety Five only) against M/s U.P State Bridge Corporation
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Limited, 218, PWD Colony, Civil Lines, Meerut under
proviso to Section 73(1) of the Finance Act, 1994;
ii. I confirm recovery of interest on the demand of service tax
of Rs.72,73,695/- against M/s U.P State Bridge
Corporation Limited, 218, PWD Colony, Civil Lines, Meerut
under Section 75 of the Finance Act, 1994.
iii. I impose penalty of Rs.72,73,695/- (Rupees Seventy Two
Lac Seventy Three Thousand Six Hundred Ninety Five only)
i.e. equal to the demand of Service tax of Rs.72,73,695/-
under Section 78 of the Finance Act, 1994 against M/s U.P
State Bridge Corporation Limited, 218, PWD Colony, Civil
Lines, Meerut. The benefit of reduced penalty i.e. equal to
25% of the total penalty imposed shall be available to the
party as per clause (ii) of Second proviso to Section 78 of
the Finance Act, 1994 if they deposit due service tax and
interest amount along with reduced penalty within 30 days
of receipt of order.
iv. I impose penalty of Rs.10,000/-(Rupees Ten Thousand
only) upon M/s U.P State Bridge Corporation Limited, 218,
PWD Colony, Civil Lines, Meerut under Section 77 of the
Finance Act. 1944."
2.1 Appellant is registered for payment of service tax under
Reverse Charge Mechanism on taxable services namely Goods
Transport Agency Service and Rent-a-Cab Operator Service as
per provisions of Section 68 of Finance Act, 1994 read with
Notification No.30/2012-ST dated 20.06.2012.
2.2 Acting on information that appellant is engaged in
construction of bridges and in process have received taxable
services namely Supply of Manpower by way of contractual
labour from various contractors for performing different activities
like shuttering, fixing & removal; pouring of concrete; curing;
reinforcement steel cutting bending and placement; shifting of
material; TSA/GSA work; Security services, Legal Services, and
Renting of Motor vehicle designed to carry passengers etc., did
not discharge the service ta liability under partial reverse charge
Service Tax Appeal No.70769 of 2018
3
mechanism as stipulated under Section 68 (2) of the Finance
Act, 1994 read with Notification No 30/2012-ST dated
20.06.2012, an enquiry was initiated against them and they
were asked to provide the details of contractors and financial
accounts for the period 01.07.2012 to 31.07.2014.
2.3 On the basis of investigations and enquiries made, a show
cause notice dated 29.09.2015 was issued to the appellant,
asking them to show cause as to why-
I. Service Tax (including Edu. Cess and SHE Cess)
amounting to Rs.72,73,695/- (Rupees Seventy Two
Lakh Seventy Three Thousand Six Hundred Ninety
Five Only), involved on (Supply of Manpower)
Service and Security Services, not paid under
reverse charge, should not be demanded and
recovered from them under proviso to Section 73(1)
of the Finance Act, 1994;
II. Service Tax (including Edu. Cess and SHE Cess)
amounting to Rs.14,628/- (Rupees Fourteen
Thousand Six Hundred Twenty Eight Only) short paid
by them on legal services should not be demanded
and recovered from them under proviso to Section
7.3(1) of the Finance Act, 1994 and an amount of
Rs.14,628/- already deposited by them should not be
appropriated against the said demand;
III. Service Tax (including Edu. Cess and SHE Cess)
amounting to Rs.25,400/ (Rupees twenty Five
Thousand Four Hundred Only) short paid by them
against renting of motor vehicles designed to carry
passengers service should not be demanded and
recovered from them under proviso to section 73(1)
of the Finance Act, 1994 and an amount of
Rs.25,400/- already deposited by them should not
be appropriated against the said demand;
IV. Interest on the amount of service tax mentioned at
Sl. No. (i) above, should not be demanded and
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recovered from them under Section 75 of the
Finance Act, 1994;
V. Interest on the amount of service tax mentioned at
Sl. No. (ii) above, should not be demanded from
them under Section 75 of the Finance Act, 1994. An
amount of Rs.7899/- already deposited by them
against interest should not be appropriated against
the said demand of interest;
VI. Interest on the amount of service tax mentioned at
Sl. No. (iii) above, should not be demanded from
them under Section 75 of the Finance Act, 1994. An
amount of Rs.10,177/- already deposited by them
against interest should not be appropriated against
the said demand of interest;
VII. Penalty should not be imposed upon them under
Section 78 of the Finance Act, 1994 for non-payment
of Service tax amounting to Rs.72,73,695/- (Rupees
Seventy Two Lakh Seventy Three Thousand Six
Hundred Ninety Five Only), involved on Supply of
Manpower Service and Security Service, under
reverse charge mentioned at SI. No. (i) above;
VIII. Penalty should not be imposed upon them under
Section 78 of the Finance Act, 1994 for non-payment
of Service tax amounting to Rs.14,628/- (Rupees
Fourteen Thousand Six Hundred Twenty Eight Only)
on legal services, and Rs.25,400/- (Rupees twenty
Five Thousand Four Hundred Only) on renting of
motor vehicles designed to carry passengers service
under reverse charge mentioned at Sl. No. (ii) & (iii)
above respectively.
IX. An amount of Rs.1317/- deposited by them as
penalty against short payment of service tax of Rs.
14,628/- (Rupees Fourteen Thousand Six Hundred
Twenty Eight Only) on legal services and an amount
of Rs.3,810/- against short payment of service tax of
Rs.25,400/- (Rupees twenty Five Thousand Four
Service Tax Appeal No.70769 of 2018
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Hundred Only) on renting of motor vehicles designed
to carry passengers service, both deposited in terms
of newly inserted clause (i) of second proviso. to
Section 78(1) of the Finance Act, 1994, should not
be appropriated;
X. Penalty should not be imposed upon them under
sections 77 of the Finance Act, 1994 for the
contravention of the provisions of Finance Act, 1994
and Rules made there under."
2.4 This show cause notice has been adjudicated as per the
Order-in-Original as referred in para 1 above. Aggrieved
appellant have filed appeal before Commissioner (Appeals), who
disposed of the appeal vide the impugned order. Hence, this
appeal.
3.1 We have heard Shri S.K. Mathur learned Counsel
appearing for the appellant and Shri Sarweshwar T. Khairnar
appearing for the Revenue.
3.2 Arguing for the appellant learned Counsel submits that-
Appellant is a State Government undertaking engaged in
the construction of bridges. This activity is performed by
self as well as through contractors in connection with
construction activities. These includes shuttering fixing and
removal; Pouring of Concrete; Curing; Reinforcement steel
cutting; Bending and placement; Shifting of material etc.
Appellant is registered with the Service Tax Department
for payment of service tax under reverse charge
mechanism on services like 'Goods Transport Agency' and
'Rent-a-Cab' service as per provisions of Section 68 (2) of
Finance Act, 1994. The issue involved in the present
appeal is with regards to the services performed by the
appellant on construction services through contractors
which have been considered as manpower service based
on payment made to them.
Show cause notice has been issued for the labor contracts,
wherein the limited supervision and control for quality
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purpose alone was exercised by the appellant, treating it
as manpower contract through it was for construction
related activities. The present dispute involves works
undertaken by the appellant though contractors related to
activities stated above, which has been considered as
manpower service though the term itself shows that these
are activities related to construction. The demand was
made under reverse charge mechanism as applicable
under Notification No.30/2012-ST dated 20.06.2012 and
confirmed by the impugned order.
The works given to the contractors for which neither
competitive bidding nor tenders are invited as per the
policy of the appellant. These are fix rate works approved
by PWD or Bridge Corporation and corporation has set
numbers of contractors who are always available for such
work. The site Engineer's statement which has been relied
upon do not support the case of the revenue. The site
engineer had admitted that they have sufficient technical
staff and labour with them. He has also categorically
stated that the contractual labour is procured for activities
like pouring of concrete, shuttering and centering,
reinforcement, local shuttering, etc. The above is correctly
stated inasmuch as the contractual labour was engaged for
construction under technical supervision to ensure quality
assurance only in disputed activities which by nature of
work is a specialized job on which UPSBCL cannot
compromise. The administrative control of undertaking the
work was not under the control of the Engineers. The
control was only to see the quality of the work.
The general terms and conditions of measurement of bills
are strictly on the basis of measurement compacted duly
verified by the site engineer and payment thereof such on
bill basis alone. These contracts are not for man power
supply.
Both the Original Authority and the Appellate Authority
have not considered the above facts of the case in proper
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and judicious manner. Further, he relies upon the following
decisions:-
o Ritesh Enterprises Vs CCE, Banglore 2010 (18) STR
17 (Tri.)
o Samarth Sevabhavi Trust Vs CCE, Aurangabad 2014
(36) STR 83 (Tri.)
o CCE Vs Computer Science 2014-TIOL-1896-HC-ALL-
ST.
Penalty is not leviable as there is no intent to evade in
government under takings as held in the case of
Superintendent of Post Office Vs CCE, Gauhati 2017 (4)
GSTL 83 (Tri.).
Appeal be allowed.
3.3 Arguing for the revenue learned Authorised Representative
reiterates the findings recorded in the impugned order and the
Order-in-Original.
4.1 We have considered the impugned orders along with the
submissions made in appeal and during the course of argument.
4.2 For confirming the demand, Commissioner (Appeals) has
observed as follows:-
"7.2 The issue in brief is that the appellant allegedly
procured contractual labour for performing various
activities such as pouring of concrete, shuttering fixing &
removal, curing, reinforcement steel cutting, bending and
placement, shifting of material etc through individual
contractors, hence in accordance with the provisions of
Section 68(2) of the Finance Act, 1994 read with
Notification No.30/2012-ST dated 20.06.2012, the
appellant was required to pay service tax of
Rs.72,73,695/- on "supply of manpower" for the period
01.07.2012 to 31.10.2014. The adjudicating authority has
confirmed the demand holding that the appellant had
received supply of manpower through individual
contractors for performing various activities such as
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pouring of concrete, shuttering fixing & removal, curing,
reinforcement steel cutting, bending and placement,
shifting of material etc.
7.3 The appellant has contended that the work assigned to
contractor is not in the nature of supply of manpower but
specific job the nature of which is duly recorded in the
contract agreement; that Order has been passed without
considering the relevant purchase orders and bills such as
M / s Juneja Construction (P) Limited, Meerut, M / S RCC
Developers Limited, Meerut, M/s Shri Dimag Singh and M/s
Shivalik Infraventures (P) Limited and four other sample
contracts which shows that the nature of work which had
been allotted to the contractors were not for manpower
but for work like pouring of concrete, shuttering and
centring, reinforcement work and local shifting of
shuttering & centring and that the payment has been given
to the contractors on the basis of per metric/per cubic
meter/per beg/per beam/per job/per point etc. basis
7.4 I have gone through the findings of the adjudicating
authority and find that the adjudicating authority has
categorically discussed the issue of supply of manpower in
detail and also analysed all the documents, referred by the
appellant in the grounds of appeal now and its reply dated
23.11.2016 submitted to the adjudicating authority at the
time adjudication of the case, before holding that the
appellant had received supply of manpower as defined
under Rule 2(g) of Service Tax Rules, 1994. I reproduce
the relevant Para of the order below-
"17. -----------------------
I have gone through the case records viz.
information filed by the party vide their letter dated
20.10.2014 containing information regarding Name of firm,
PAN No., Income Tax for the year, Total Work done
amount and nature of work. As per information, the party
had made payments to contractors who were mainly
Service Tax Appeal No.70769 of 2018
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proprietorship or partnership concern for performing
various activities including pouring of concrete, shuttering
fixing and removal, curing, reinforcement steel cutting,
bending and placement, shifting of material, TSA / GSA
work and security; the work related (i) Pouring of
Concrete, (ii) Shuttering & Centering, (iii) reinforcement
work and (iv) Local shifting of shuttering & Centering and
Reinforcement at site constitute "labour work" only. I
further find that Sh. Vinod Kumar Singh, S/o Late Sh. Gaje
Singh, Assistant Engineer of M/s U.P State Bridge
Corporation Limited, Meerut in his statement dated
12.02.2015, recorded under Section 14 of the Central
Excise Act, 1944, had admitted that (i) that M/s U.P. State
Bridge Corporation limited are engaged in the construction
of bridge; (ii) that they have sufficient technical staff and
labour for completion of their project, however, sometimes
they procure contractual labour for various activities like
pouring of concrete, shuttering & centering, reinforcement;
local shuttering, Centering and TSA/GSA etc and all these
activities are monitored by their own technical staff; and
(iii) that at the site of construction, temporary sheds of
CGI sheets and pipes are constructed through contractual
labour and this work is known as TSA/GSA.; that poring of
concrete, shuttering, centering, reinforcement, local
shuttering centering shifting purely a labour based services
as stated in their letter dated 20.10.2014. I find that the
party has not submitted any contract related to activities in
question and all the contract agreements, submitted by
them, contain other type of activities, hence, the plea
taken by the party that services of petty contractors were
specific jobs and not supply of man power is without any
basis. Contract wise details are given below-
(i) Quotation/Offer dated 20.03.2014- It pertains
to repair work described as "M.S or iron work of
small size and section---------." This has no linking
with the present issue.
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(ii) Agreement dated Nil related to M / s Dimag
Singh, 26, Ganna Society Market, Khatauli- It
pertains to GSB Work & WMM work for ROB-55,
Mewla Bridge, Meerut. The facts of this document
are entirely different.
(iii) Agreement dated 17.11.13 of M/s Shivalik
Infraventures (P) Limited, Saharanpur is related to
WMM, Prime Coat Tack Coat etc
(iv) Agreement dated 30.07.2014 of M/s Juneja
Construction Pvt Limited is related to work defined as
DBM, BC, Prime Coat etc.
(v) Agreement dated 01.06.2013 of M/s RCC
Developers Limited, Meerut is related to laying of
GSB 115 MM and laying of W.M.M 125 MM Abu Nala
Bridge Meerut.
Thus, in view of the facts discussed above and
admittance of the party in their letter dated 20.10.2014
and affirmed by Sh.Vinod Kumar Singh, Assistant Engineer
in his statement dated 12.02.2015, I find that the party
had procured labour through petty contractors and got the
work completed under the supervision and control of their
technical staff. Therefore, services provided by the said
contractors fall under the category of supply of manpower
as defined under Rule 2(g) of the Service Tax Rules,
1994".
7.5 From the above, it is clear that the appellant's plea
that the adjudicating authority had not considered the
agreement/contracts they entered into with different
contractors is factually incorrect. It is matter of fact that in
the Government Sector any job/work is assigned to any
contractor after following due procedure of tendering and
awarding contracts for each work. The appellant has also
agreed upon on this issue. Thus, if the appellant, being a
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Government Undertaking, had awarded any work
contract/job to any of the contractors having
proprietorship or partnership concerns related to nature of
work pointed out in the SCN i.e. pouring of concrete,
shuttering fixing and removal, curing, reinforcement steel
cutting, bending and placement, shifting of material,
TSA/GSA work and security, they should have placed it
either at the time of investigation or before the
adjudicating authority at the time of adjudication. But the
appellant has failed to produce any such
agreement/contract related to disputed activities before
the adjudicating authority. Even in the appeal also in spite
of submitting the copy of agreement/contract related to
pouring of concrete, shuttering fixing and removal, curing,
reinforcement steel cutting, bending and placement,
shifting of material, TSA / GSA work and security, they
continued to reiterate the same facts as they did before
the adjudicating authority at the time of adjudication.
Therefore, the contention of the party that the work got
done through labour provided by contractors was specific
job not the supply of manpower has factually incorrect.
7.6 Up to 30.06.2012, the 'Supply of Manpower" was
defined as under: -
Section- 65(105)(k)- "Manpower Recruitment and
supply Agency Service" Taxable service means any
service provided or to be provided to any person, by
a manpower recruitment or supply agency in relation
to the recruitment or supply of man power,
temporarily or otherwise"
However, w.e.f. 01.07.2012, the dentition of "Supply
of manpower" provided under Rule 2(g) of Service Tax
Rules, 1994 reads as under-
Rule 2(g) "supply of manpower" means supply of
manpower, temporarily or otherwise, to another
person to work under his superintendence or control.
Service Tax Appeal No.70769 of 2018
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Thus, to fall under the category of "Supply of
manpower" following two criterions must be satisfied-
(i) There should be supply of manpower
temporarily or otherwise and
(ii) The labour should work under the
superintendence and control of the
principal.
7.7 I find that Sh. Satish Kumar, Project Manager of the
appellant in his letter dated 20.10.2014 had categorically
admitted that following works constitute labour work only
and completed under supervision of their technical staff-
(i) Pouring of concrete
(ii) Shuttering and centring
(iii) Reinforcement work
(iv) Local shifting of shuttering & Centring and
reinforcement at site.
I further find that Sh. Vinod Kumar Singh, Assistant
Engineer & authorized person of the appellant in his
statement dated 12.02.2015 recorded under Section 14 of
the Central Excise Act, 1994 had admitted that the
company has sufficient number of technical staff, labour
and massions but on requirement they procure labour from
outside for getting certain works done and the activities
namely pouring of concrete, shuttering & centring,
reinforcement work, local shifting of shuttering & centring
are purely labour based and completed under the
supervision of their technical staff.
7.8 Thus, in view of the above, I find that the work of
pouring of concrete, shuttering & centring, reinforcement
work, local shifting of shuttering & centring were got
completed by the appellant by way of procurement of
labour through individual contractors under the
superintendence and control of their technical staff. Hence,
providing of labour by the individual contractors fall under
the category of services namely "supply of manpower" in
Service Tax Appeal No.70769 of 2018
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terms of Rule 2(g) of Service tax Rules, 1994 and
remuneration paid in the form of per SQFT/CFT etc could
not change the nature of services actually provided. Since
the appellant had received supply of manpower through
individual contractors as is also evident from the ledger
account submitted by the party vide their letter dated
20.10.2014, they are liable to pay service tax involved on
the payments made by them to the said contractors under
Section 68(2) of the Finance Act, 1994 read with
Notification No. 30/2012-ST dated 20.06.2012. Therefore,
the adjudicating authority has rightly confirmed the
demand of Rs.72,73,695/- along with interest. I get
support from the decision of the Hon'ble tribunal in case of
M/s Interscape Vs CCE, Calcutta-l reported in 2001 (135)
E.L.T. 942 (Tri. - Kolkata) who has held that-
"Manufacture - Job work - Mere raising of bill
at rate contract basis instead of daily-wage
basis, itself not sufficient to imply that labour
contractor was manufacturer, when labour
worked under control and supervision of
noticee, who were responsible towards their
clients for design, quality and time-frame of
work - Labour contractor held not to be job
workers - Section 2(f) of Central Excise Act,
1944."
4.3 Before we taking the legal issues, it is necessary to look
into the contract agreement. Some of the contracts which
revenue is treating as labour contract are as reproduced:-
Service Tax Appeal No.70769 of 2018
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Service Tax Appeal No.70769 of 2018
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4.4 From perusal of this contract agreement this is evident
that contract is awarded for certain works to be executed by the
contractor. In this contract, not even single word has been
stated in this contract which indicates that this is a labour
contract for supply of manpower. Similar is situation in the
contract dated 7th May, 2014, which is also reproduced bellow
for ready reference:-
Service Tax Appeal No.70769 of 2018
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Service Tax Appeal No.70769 of 2018
17
4.5 This contract is also not in respect of any supply of labour
but the same is for execution of the work. Similarly, the contract
dated 12 November, 2013 also reproduced below, do not show
that this is a contract for supply of manpower:-
Service Tax Appeal No.70769 of 2018
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Service Tax Appeal No.70769 of 2018
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4.5 The invoices raised against these contracts are not for
supply of labour but are for supply of material. Work done under
these contracts is for undertaking a work activity involving
supply of material also. Then on what basis revenue could have
concluded that these activities amounted to 'Supply of Manpower
Service' to the appellant for demanding service tax.
4.6 We also perused the documents of the appellant, stating
General Terms and Conditions (GSB & WMM Work), and some of
them are reproduced bellow:-
"2. The Quantities indicated in BOQ are tentative and
can vary +/- 20% as per site conditions which is at the
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sole discretion of UPSBC. The work is tto be done for all
leads and lifts for supply of material.
3. Contractors bidding for material supply should have
valid registration in the UP Sales Tax Department/VAT.
4. Contractor should quote his rates in the BOQ. The
rates quoted by the contractor should be inclusive of all
forest taxes, octroi, toll tax, Royalty, VAT and
transportation charges.
5. ----------------
6. -------------------
7. -----------------------
8. In case of tenders for supply of aggregate preference
shall be given to contractors/suppliers who are Crusher
owners and screening plant owners.
9. The measurement of work done by the site engineer
or established by UPSBC shall be acceptable and payable
to the CONTRACTOR and no dispute or claim whatsoever
shall be entertained on this account.
------------------------
18. If the contractor is not able to complete the work because of any reason, the work can be got executed by debitable agency. Also the corporation shall be free to forfeit the security and earnest money deposited by the contractor.
19. -----------
20. All the tests required as per Technical Specification shall be carried out at site (particularly field test) in Site Laboratory or in any Laboratory approved by UPSBC Ltd. The cost of testing shall be born by UPSBC but the Contractor will be liable to provide men/transportation at his own cost required for transshipments of samples/specimens from work place to site Laboratory or to any laboratory."
Service Tax Appeal No.70769 of 2018 21 4.7 On perusal of the above it is quite evident that as per the General Terms and Conditions of the appellant's agreement, all these are works contract involving supply of material and labor. They cannot be in any case to be treated as supply of manpower.
4.8 In the present case relying upon Section 68 of the Finance Act, 1994 read with Notification No.30/2012-ST dated 20.06.2012 demand has been made under partial reverse charge mechanism, treating these supplies as taxable services under the category of 'Manpower Supply Agency Services". The relevant provisions of the act and notification for the purpose of the case under discussion are reproduced below:-
Section 68. Payment of service tax-(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in respect of [such taxable services as may be notified] by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in Section 66B and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such services:
Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider Notification No.30/2012-ST dated 20.06.2012 In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), ..., the Central Government hereby notifies the following taxable services and Service Tax Appeal No.70769 of 2018 22 the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub-section, namely:-
(I) The taxable services,- A. i.......
(v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who isnot in the similar line of business or supply of manpower for any purpose or service portion in execution of works contract byany individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, locatedin the taxable territory to a business entity registered as body corporate, located in the taxable territory;
B. ...... (II) The extent of service tax payable thereon by the person
who provides the service and the person who receives the service for the taxable services specified in (I) shall be as specified in the following Table, namely:-
TABLE Sl. Description of a service Percentage of Percentage of No. service tax service tax payable by the payable by the person person providing receiving the service service
8. in respect of services provided or 25% 75 % agreed to be provided by way of supply of manpower for any purpose 4.9 The above provisions make the service recipient liable to pay service tax under partial reverse charge mechanism under certain categories specified in this notification. In the present case the demand has been made during the services received as Manpower Supply Services, in terms of para-8 of the table annexed above. On perusal of the documents and invoices we find that in none of invoice has service tax of 25% for the supply Service Tax Appeal No.70769 of 2018 23 of Manpower Services as required by the above notification has been paid by the service provider. The demand of 75% has been made by the recipient of the service. It is not available anywhere on the record whether any notices or any demands have been issued to the service provider, in terms of above notification for payment of 25% of service tax for Supply of Manpower Services.
4.10 In our view, the present services do not qualify as Manpower Supply Service, as it is associated with supply of material also, it is a work contract service which has been defined by Section 65 (54) of the Finance Act, 1994 as amended by Finance Act, 2012 as follows:
"(54) "works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;"
If any tax has been short paid by the appellant then it could be under this category and not in the category of Manpower Supply service.
4.11 In respect of the Works Contract Services the charge of service tax is on the service provider and not on the service recipient in terms of the above provisions. Accordingly, the demands made by the revenue by invoking the provisions of Section 68 (2) do not stand in the test of law. Accordingly, these demands are to be set aside.
4.12 Further, Counsel for the appellant has relied upon the various decisions which have held that which supports the case for holding that the services received by the appellant do not qualify as Manpower Supply Services. Though, we agree with the principals lead down in the said decisions but we are not in a position to follow the said decisions as they are for the period Service Tax Appeal No.70769 of 2018 24 prior to the amendments made in the year 2012, when the charge of service tax was on the basis of definition of various services. All though, the principles as stated in the decisions for consideration whether a particular service can be treated as a Manpower Supply Service can be taken from this judgment of Hon'ble Allahabad Jurisdictional High Court in the case of Commissioner of Central Excise Vs M/s Computer Sciences Corporation India Pvt. Ltd. 2014-TIOL-1896-HC-ALL-ST, wherein following has been held:-
"7. In order to be a taxable service within the meaning of Section 65(105)(k), the service must meet the following requirements :
(i) there has to be a service provided or to be provided to any person;
(ii) the service has to be provided by a manpower recruitment or supply agency; and
(iii) the service must be provided in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner.
8. In the present case, the Commissioner clearly missed the requirement that the service which is provided or to be provided, must be by a manpower recruitment or supply agency. Moreover, such a service has to be in relation to the supply of manpower. The assessee obtained from its group companies directly or by transfer of the employees, the services of expatriate employees. The assessee paid the salaries of the employees in India, deducted tax and contributed to statutory social security benefits such as provident fund. The assessee was also required to remit contributions, which had to be paid towards social security and other benefits that were payable to the account of the employees under the laws of the foreign jurisdiction. There was no basis whatsoever to hold that in such a transaction, a taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or Service Tax Appeal No.70769 of 2018 25 supply agency. Unless the critical requirements of clause
(k) of Section 65(105) are fulfilled, the element of taxability would not arise."
4.13 As the above principles has laid down by the Hon'ble Jurisdictional High Court, which clearly categories these services as not the services of Manpower Supply, we do not find any merits in the impugned order and the same are set aside.
4.14 The sole evidence relied upon by the revenue for fasting this demand on the appellant is statement of Sh. Vinod Kumar Singh, Assistant Engineer and a letter of Shri Satish Kumar, Project Manager. In a case of Samarth Sevabhavi Trust [2014 (036) STR 83 (T-Mum)] involving similar facts following has been held:
"6. We have carefully considered the rival submissions and also perused the agreements entered into by the appellant with the sugar factory as also with the transporters. From the agreement dated 2-1-2006 with the sugar factory, it is seen that the same is for cutting and transportation of sugarcane from the farmers' fields to the sugar factory, who have agreed to sell their sugarcane to the sugar factory. The agreement is not for supply of any labour. The rates agreed upon for the said work are per tonnage of sugarcane supply, both for harvesting as well as transportation. This would clearly indicate that the activity undertaken cannot, by any stretch of imagination, be called supply of manpower. We have also perused the agreement entered into between the Trust and the transporters and as per this agreement, it is for the transporter to engage labour for harvesting and transporting the sugarcane to the sugar factory and the rates agreed to be paid are on tonnage basis of the sugarcane supplied and not for the supply of any manpower. From these agreements, it is obvious that no manpower has been supplied by the appellant to the sugar factory to constitute supply of manpower. As per Section Service Tax Appeal No.70769 of 2018 26 65(105)(k) of the Finance Act, 1994, taxable service means "any service provided or to be provided to any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner". From the documents available on record, we do not find any activity undertaken by the Trust either for the recruitment of manpower or for supply of manpower to the sugar factory. This Tribunal, in similar circumstances, in the case of Amrit Sanjivni Sugarcane Transport Co. Pvt. Ltd. (supra) held that harvesting of sugarcane and transportation thereof to the sugar factory from the farmers' fields would not come under the purview of manpower recruitment or supply agency service and would be more appropriately classifiable under "business auxiliary services". These decisions relied upon by the appellant and the orders of the Commissioner (Appeals) also support this view. Merely because in the statements, the deponents therein, based on their understanding agreed that the services come under the manpower supply, the same cannot be the basis for demand of service tax. The demand has to be made in accordance with law, taking into account the contracts entered into by the appellant with the various parties involved in the transaction. The demands cannot be confirmed on the basis of a wrong understanding entertained by the appellant or anybody else. .."
4.15 In case of Ritesh Enterprises [2010 (18) STR 17 (T-)] following has been held:
"8. As regards the works executed by the appellant M/s. Karwar Dock & Port Labour Cooperative Society Ltd., we find from the records and the documents produced before us that they were intimated about the berthing of vessels at various ports and they were given a lump sum contract for cargo handling i.e. loading and unloading of the goods into the said vessels. We perused the invoices issued by Service Tax Appeal No.70769 of 2018 27 the appellant M/s. Karwar Dock & Port Labour Cooperative Society Ltd., which is annexed at Page Nos. 170 and 171 of the appeal memoranda and noted that the invoices are raised as "cargo handling for granite export loading of Indian rough granite blocks" for a lump sum amount, charged per Metric Tonne.
9. On a careful consideration of the above reproduced facts from the entire case papers, we find that the contract which has been given to the appellants is for the execution of the work of loading, unloading, bagging, stacking destacking etc., In the entire records, we find that there is no whisper of supply manpower to the said M/s. Aspin Wall & Co. or to CWC or any other recipient of the services in both these appeals. As can be seen from the reproduced contracts and the invoices issued by the appellants that the entire essence of the contract was an execution of work as understood by the appellant and the recipient of the services. We find that the Hon'ble Supreme Court in the case of Super Poly Fabriks Ltd. v. CCE, Punjab (supra) in paragraph 8 has specifically laid down the ratio which is 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."
An identical view was taken up by Hon'ble Supreme Court in the case of State of A.P. v. Kone Elevators India Ltd. (supra) and UOI v. Mahindra and Mahindra in a similar issues. The ratio of all the three judgments of the Hon'ble Supreme Court, is that the tenor of agreement between the parties has to be understood and interpreted on the basis that the said agreement reflected the role of parties.
Service Tax Appeal No.70769 of 2018 28 The said ratio applies to the current cases in hand. We find that the entire tenor of the agreement and the purchase orders issued by the appellants' service recipient clearly indicates the execution of a lump-sum work. In our opinion this lump-sum work would not fall under the category of providing of service of supply of manpower temporarily or otherwise either directly or indirectly.
10. On perusal of the records and the submissions of learned SDR on the Master Circular dated 23-8-2007, we find that the issue is raised at clause 010.02 is as under :
Business or industrial In the case of supply of manpower individuals organizations engage are contractually employed by the manpower services of manpower recruitment or supply agency. The agency recruitment or supply agrees for use for the services of an individual, agencies for temporary employed by him to another person for a supply of manpower which consideration. Employer-employee relationship is engaged for a specified in such case exists between the agency and the period or for completion of individual and not between the individual and particular projects or the person who uses the services of the tasks. individual.
Whether Service tax is Such cases are covered within the scope of the liable on such services definition of the taxable service Section under manpower 65(105)(k) and, since they act as supply agency, recruitment or supply they fall within the definition of "manpower agency's services? recruitment or supply agency" Section 65(68) and are liable to service tax
11. It can be seen from the above reproduced portion of the Master Circular that it is in respect of supply of manpower which is engaged for specified period or for completion of particular projects or tasks. The clarification, is in case of supply of man power, it can be seen that the clarification specifically reads that the agency agrees for use of services of an individual to another person for a consideration as supply of manpower. In the cases in hand, there is no agreement for utilization of services of an individual but a job/lump-sum work given to the appellants for execution. The said clarification issued by the Board would be appropriate in the case where services of man power recruitment & supply agency, had been temporarily taken by the Business or the industrial association for Service Tax Appeal No.70769 of 2018 29 supplying of manpower and may/may not be for execution of a specific work. We are of the considered view that the reliance placed by the learned SDR and the learned Commissioner on the circular will not carry the case of the Revenue any further.
4.16 It is evident from the above stated case laws that the contract/ agreement entered between the parties should be read as whole and understood as whole. There is no scope for interpreting the agreement differently from what has been stated in the contract/ agreement. A work contract agreement will involve supply of services for which certain manpower will be deployed. Just for the reason that the manpower was deployed by the appellant nature of agreement cannot be changed from the one that was intended between the contracting parties. For the reasons as stated above we do not find any merits in the impugned order.
5.1 Appeal is allowed.
(Pronounced in open Court on- 07/11/2023) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp