Custom, Excise & Service Tax Tribunal
M/S Ptl Enterprises Ltd vs Commissioner Of Central Excise, ... on 1 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/26969/2013-DB, ST/26970/2013-DB, ST/662/2012-DB [Arising out of Order-in-Original No. 26/2011 dated 27/12/2011 and Order-in-Original Nos. 40 & 41/2013 dated 26/3/2013, passed by Commissioner of Central Excise & Customs, Cochin] For approval and signature: 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s PTL Enterprises Ltd., Kalamassery, COCHIN 683104 (KERALA). Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax, COCHIN C. R. BUILDING, I.S. PRESS ROAD, Kochi - 682018. Respondent(s)
Appearance:
Mr. Joseph Kodianthara, Sr. Advocate 42/2260, PROVIDENCE ROAD KOCHIN 682018 For the Appellant Shri. Mohd. Yusuf, A.R. For the Respondent Date of Hearing: 01/06/2016 Date of Decision: .
CORAM :
SHRI S.S. GARG, HONBLE JUDICIAL MEMBER SHRI ASHOK K. ARYA, HONBLE TECHNICAL Final Order Nos. 20419 to 20421 / 2016 PER ASHOK K. ARYA The matter concerns with payment of service tax to the tune of over Rs. 11.60 crores and equivalent penalty and other penalties under respective provisions of the Finance Act, 1994. Period involved in the demands is from June 2005 to January 2010.
2. The appellant is a Public Limited Company namely, M/s PTL Enterprises Ltd. (PTL) located at Cochin, Kerala, incorporated under Companies Act, 1956. Later, on account of certain factors, Companys operations became non-profitable resulting in erosion of its net worth and it was referred to the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. The BIFR passed an order dated 17.4.1995 sanctioning the Scheme for take over of the appellant company by M/s Apollo Tyres Limited (ATL).
2.1. Consequent to BIFR sanctioned Scheme, appellants factory was leased out by the appellant to M/s Apollo Tyres Ltd.(ATL) under a Lease Agreement dated 14.5.2005 and the appellant paid service tax on the lease rental received from ATL under the category of Renting of Immovable Property.
2.2. Consequent to the BIFR sanctioned Scheme, workers engaged in production in the appellants factory entered into a fresh Agreement (Supplementary Agreement) with respect to their continued engagement in production of tyres at the appellants factory, where the appellant (PTL) was manufacturing tyres and tubes for ATL under the brand name of ATL. Consequent to the BIFR Scheme, the Lease Agreement was signed between the appellant (PTL) and Apollo Tyres Ltd. (ATL) on May 14, 2005. In the Lease Agreement, it was inter-alia mentioned that in addition to payment of lease rental, ATL will reimburse to the appellant, PTL the actual expenses for the following :
(a) Power and Fuel
(b) Store and Spares
(c) Repair and maintenance
(d) Personal cost.
(e) Expenses under any other head relatable to production/manufacture of tyres/tubes.
3. The Revenue has confirmed the demand along with penalties under the head of Manpower Recruitment or Supply Agency saying that the reimbursement made by ATL to the appellant (PTL) on account of Personnel Cost is actually covered by the category of service namely manpower recruitment and supply agency service, which is covered under the definition of taxable service of manpower recruitment or supply agency given in Section 65 (105) (k) of the Finance Act, 1995.
4. After confirmation of this demand of service tax to the tune of Rs. 11,60,78,714/- and imposition of penalties by the impugned order, the appellant is before this Tribunal in appeal against the said order of the Commissioner of Central Excise and Customs, Cochin.
5. The appellant has been represented by the learned Senior Advocate, Mr. Joseph Kodianthara. The appellant in its appeal and during the hearing held on 01.06.2016, the learned Sr. Advocate have inter-alia pleaded as follows :
(i) If any service tax is payable on alleged manpower recruitment or supply agency it was available as credit to ATL for the goods manufactured in the same premises and it is a clear case of revenue neutrality.
(ii) It is not manpower supply and it is actually a manufacturing agreement between the appellant and M/s ATL. Here, the appellants namely PTL is only responsible for all the working conditions and affairs of the staff and employees working within their premises though they are manufacturing goods for ATL brand.
(iii) A perusal of the Rehabilitation Scheme dated 17.4.1995 will disclose that the same envisages that ATL will operate the plant of PTL under a lease for eight years. Plant will mean factory and its workers. There is no transfer or loaning of personnel / workers by PTL (appellant) to ATL for this purpose.
(iv) PTL (appellant) is not rendering the Service of manpower supply within the meaning of Section 65 (68) of the Finance Act, 1994.
(v) The Rehabilitation Scheme contemplates joint operations between ATL and PTL. The factory is to be run by PTL employing its workers and the entire production of PTL is to be lifted by ATL. In such joint operation between ATL & PTL there is no question of either (one) rendering any service. ATL merely provides / renders quality related management / supervisory assistance and PTL actually carries out the manufacturing operations at its factory. In such a situation there can be no question of any service being rendered either way and a contrary view will result in a situation of rendering service to oneself.
(vi) The subsequent Lease Agreement further reiterate and contemplate continuing the joint operation arrangement as between ATL and PTL. This again emphasizes that there is no transfer or loaning of personnel by PTL to ATL and hence there is no question of any manpower supply. In this context, it is pertinent to mention that the show-cause notice refers to manpower recruitment services which cannot arise in the facts and circumstances of the present case.
(vii) Without prejudice to the above, during the period upto 22.3.2006, PTL was a subsidiary of ATL. During the said period in any case there can be no question of any service. Even thereafter as afore-mentioned in view of the clear provisions for joint operation the question of any service by one to the other cannot arise. In the facts and circumstances, there is no service that can be said to have been rendered nor can there by any question of any relationship of the service provider and client between the appellant and ATL. As aforementioned there can be no service in such a joint operation to oneself.
(viii) The long term settlements entered into between PTL (appellant) and its workers engaged for production at the factory provide for and pertain to settlement of service conditions including promotion of the workers. It is therefore difficult to understand as to how there is any manpower supply by PTL to ATL. The composite scheme for rehabilitation necessarily also contemplated rehabilitation of the labour engaged in the production at the appellants factory. The detailed provisions with respect to such continued engagement of the labour and the rehabilitation are also available in the scheme itself. In effect therefore the factory was taken over and the operations continued with the existing workers by ATL under the scheme aforementioned. The Sanctioned Rehabilitation Scheme envisaged that Apollo Tyres Ltd. (ATL) will operate the plant of the appellant (PTL) on an irrevocable lease of eight years and pay a total lease rental of Rs. 4550 lakhs over the period of rehabilitation.
(ix) Upon expiry of the initial lease period of eight years, the lease arrangement has been continuing till date on agreed terms and conditions which as aforementioned provide for joint operations.
(x) The situation therefore is one where the appellants factory which was engaged in the manufacture of tyres continued such manufacturing / production activity for manufacture of tyres for and on behalf of ATL and under the ATL brand.
(xi) From the facts, it will be seen that the appellant cannot under any circumstances be stated to be engaged in the provisioning of manpower recruitment or supply agency service. The question of the appellant providing any service directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise clearly does not arise. There has been no service provider or any person to whom such service has been provided.
(xii) In any case there has been no manpower recruitment and / or supply by the appellant to Apollo Tyres Ltd. (ATL) and the question of any such recruitment and / or supply does not arise.
5.1. The learned Sr. Advocate inter-alia further argues that
(i) Show-cause notice is totally unsubstantiated and erroneous alleging willful suppression. The allegation of willful suppression and intention to evade payment of service is unsustainable.
(ii) There can be no question of loaning or even supply of personnel in an integrated and interdependent activity of manufacture of tyres by the appellant by using its infrastructure including its workers at the appellants factory.
(iii) The Respondent Commissioner failed to note that any service tax paid by the appellant as a manpower supply agency to ATL would then be available in the hands of ATL as an input Service Credit. Undisputedly the exercise was therefore revenue neutral and the question of any demand leave alone invoking the extended period clearly did not arise.
(iv) The entire facts were within the knowledge of the department. The mere fact that the disputed tax was not paid obviously on the bonafide and correct premise that there is no supply of manpower but only a continued engagement of the appellants labour by the appellant for its manufacturing activity and the reimbursement of the entire manufacturing expenses by ATL cannot lead to an allegation/conclusion of suppression on the part of the appellant.
5.2. In case of allegation of suppression, the appellant has placed reliance on the following decisions of the various higher judicial fora :
(i) Collector of Central Excise Vs. Chemphar Drugs & Liniments [1989 (40) E.L.T. 276 (S.C.)]
(ii) Pushpam Pharmaceuticals Company Vs. Collector of Central Excise, Bombay [1995 (78) E.L.T. 401]
(iii) Continental Foundation Vs. C.C.E., Chandigarh [2007 (216) E.L.T. 177 (S.C.)]
(iv) GAC Shipping (India) Pvt. Ltd. Vs. C.C.E., Cochin [2009 (13) S.T.R. 147] 5.3. In case of revenue neutrality, the appellant placed reliance on the following case laws :
(i) Commissioner Vs. L.S. Mills [2011-TIOL-931]
(ii) Commissioner of C.E., Madurai Vs. Chillies Export House Ltd. [2011 (24) STR 40 (Tri.-Chennai)
(iii) Dieshchandra R. Agarwal Infracon Pvt. Ltd. Vs. CCE, Ahmedabad [2010 (18) S.T.R. 39]
(iv) Popular Vehicles & Services Ltd. vs. CCE, Kochi [2010 (18) STR 493 (Tri.-Bang.)] 5.3.1 In support of their arguments, learned Sr. Advocate further relied on the following case laws :
(i) Vidarbha Iron & Steel Co. Ltd. Vs. CCE, Nagpur [2015-TIOL-1710-CESTAT-MUM]
(ii) Commissioner of Central Excise Vs. Computer Sciences Corpn. India P. Ltd. [2015 (37) S.T.R. 62 (All.)]
(iii) Commissioner of Service Tax Vs. Arvind Mills Ltd. [2014-TIOL-441-HC-AHM-ST]
(iv) S.S. Associates Vs. CCE, Bangalore [2010 (19) S.T.R. 438 (Tri.-Bang.)]
(v) Ritesh Enterprises Vs. C.C.E., Bangalore [2010 (18) S.T.R. 17 (Tri.-Bang.)]
(vi) C.C.E., Pune Vs. Coca-Cola Indias Pvt. Ltd. [2007 (213) E.L.T. 490 (S.C.)]
(vii) Popular Vehicles & Services Ltd. Vs. C.C.E., Kochi [2010 (18) STR 493 (Tri.-Bang.)]
(viii) Uniworth Textiles Ltd. Vs. C.C.E., Raipur [2013 (288) E.L.T. 161 (S.C.)]
6. Revenue was represented by the learned A.R., Mr. Mohd Yusuf, learned A.R., who reiterated the findings given in the impugned order. Learned A.R. further argued that when the appellant is paying service tax on lease rental received by them under the head of renting of immovable property, they are liable for payment of service tax for reimbursement money being received by the appellant on account of manpower working for manufacturing the goods under ATL brands.
6.1. The learned A.R. further argued as follows :
(i) Revenue neutrality cannot be an argument for non-levy of service tax when the appellant was paying service tax under the category of renting of immovable property on the lease rentals received by them. The appellant cannot argue that they have not suppressed the fact of manpower supply to M/s ATL, when they were not paying any service tax on the money received as reimbursement for manpower supply to ATL.
(ii) All ingredients for payment of service tax i.e. service provider, service recipient and service activity have been fulfilled as service provider is appellant and service recipient is ATL and service is manpower supply.
7. All the facts of the subject appeal case available on record and the submissions of both the sides have been carefully considered.
8. We find that this is not an ordinary case but a special case where there have special arrangements and systems been laid down under a Special Scheme (BIFR approved Scheme), which is evident from the various documents available on record.
8.1. The appellants operations had become non-profitable further leading to erosion in its net worth. Consequently, appellants operations were referred to BIFR under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985. The BIFR issued an order dated 17.4.1995 sanctioning a Scheme for take over of the appellants company by M/s Apollo Tyres Ltd. (ATL). We find on record the fact of separate agreements / supplementary agreements in case of production and in case of the workers for their continued engagement for production of tyres at the appellants factory, which are part of the Annexures to the BIFR Scheme i.e. 17.4.1995. There are on record further long term settlements entered into which are dated 22.2.1995, 29.4.1998, 5.12.2002 and 28.12.2006 for the continued engagement of workers at the appellants factory. It is the fact that the appellants factory itself was leased out by the appellant to M/s ATL under a Lease Agreement dated 14.5.2005.
9. We have gone through various definitions of the service in question namely manpower recruitment or supply agency service. These various definitions, which got amended time to time, are mentioned below :
The definition of manpower recruitment agency providing the said service, prior to 16-06-2005 as given in the Finance Act, 1994 reads as follows :
(68) manpower recruitment agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower, to a client This definition after amendment of 16-6-2005 reads as follows :
manpower recruitment or supply agency means any commercial concern engaged in providing any service directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client. This definition was further amended on 1-5-2006 and 16-5-2008 and now reads as follows :
[(68) 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 relevant charging provision for this taxable service under Section 65 (105)(k) before its amendment (with effect from 16-5-2008) reads as follows :
Section 65 (105): Taxable service (of manpower recruitment or supply agency) means any service provided or to be provided -
(k) to a client by a manpower recruitment or supply agency in relation to recruitment or supply of manpower, temporarily or otherwise, in any manner, After the amendment with effect from 16-05-2008 the charging provision under Section 65 (105) (k) of the Finance Act, 1994 reads as follows :
Section 65(105) [(k) [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;] 9.1. After reading the definition(s) of manpower recruitment / supply agency service, the main ingredients of said definition(s) are as follows :
(i) Service provider
(ii) Service recipient
(iii) Provision of making the availability of manpower Further, this availability of manpower for the services can be temporary or other than temporary.
9.2. When one examines overall facts available on the record, strictly speaking one does not find that there has been any manpower supply made either to M/s ATL or to anybody else as workers / manpower working within the premises of the appellants factory continued to work as earlier i.e. prior to the date of Lease Agreement dated 14-5-2005 wherein in the clause 4 (d), it has been mentioned that M/s ATL will reimburse actual expenses on account of personnel cost. Here, the staff/personnel are still working under the control or supervision of the appellant (PTL) though their salaries (actual expenses) are coming from M/s ATL. This is clear when this Lease Agreement clause 6 says that the appellant (PTL) shall be responsible for all statutory rules and regulations concerning employees/workmen employed. This clause is reproduced below :
6. PTL shall be responsible for compliance of all statutory rule/regulations including labour welfare legislations pertaining to the employees/workmen employed by it and engaged in the manufacturing activities at the plant of PTL. 9.3. The Lease Agreement clearly says that it is a kind of special arrangement which has been agreed to also in accordance with Rehabilitation Scheme dated 17.4.1995 sanctioned by BIFR for rehabilitation of appellants unit i.e. PTL. In the Lease Agreement this has been mentioned in its Preamble in Para 2. It is also to be noted that this Lease Agreement dated 14.5.2005 mentions that this joint operation i.e. renting of appellant (PTL) plant for manufacturing ATL brand of tubes and tyres had been continuing for the period from 1.4.1995 to 31.3.2003 and the same was subsequently extended to 31.3.2005 and the said parties namely the appellant (PTL) and ATL desired to continue the same joint operations agreement,, therefore, entered into the said Lease Agreement dated 14.5.2005. In order to make above observations more evident, we reproduce from the Preamble to the Lease Agreement dated May 14, 2005 entered into between the appellant, M/s Premier Tyres Ltd. (PTL) and M/s Apollo Tyres Ltd. (ATL).
AGREEMENT TO LEASE . .. ..
WHEREAS in accordance with the Rehabilitation Scheme dated 17.4.1995 sanctioned by Board for Industrial and Financial Reconstruction New Delhi for rehabilitation of PTL, ATL was to operate the plant of PTL on irrevocable lease of eight years on payment of lease rental as stipulated in the said order; and WHEREAS both ATL and PTL carried out the joint operations as above for the period of eight years from 1.4.1995 to 31.3.2005 and subsequently extended the same upto 31st March 2005, from time to time.
WHEREAS both the parties are desirous of continuing the joint operations arrangement for the present; and NOW THEREFORE THIS AGREEMENT IS ENTERED INTO BETWEEN ATL AND PTL ON THE FOLLOWING TERMS AND CONDITIONS :-
.. .. ..
9.4. We have carefully examined the said Lease Agreement and the facts on record. The facts and the contents of the Lease Agreement do not lead us to conclude that there has been a manpower supply by the appellant (PTL) to Apollo Tyres Ltd. (ATL) for manufacturing ATL brand of tyres and tubes. There were joint operations going on in the interest of both the parties including in the interest of employees/workmen (manpower) so that the employees/workmen could continue to earn their livelihood and further, the appellant company does not get permanently sick and get closed. By examining all the documents on record and the ground realities including the facts on record do not lead us to agree with the premise of the Revenue that the appellant was supplying manpower to M/s ATL to cover the activity of manufacturing of ATL brand tyres and tubes by personnel belonging to the appellant (PTL) under the category of taxable service of manpower supply service which underwent many changes in its definition part by the amendments made in the Finance Act, 1994, mentioned earlier.
10. In our above findings and discussions, we have been sufficiently influenced by the relevant decisions of higher judicial fora, which we are mentioning herein below. These decisions clearly justify the view of non-leviability of Service Tax, on the activity and transaction in question, which is also the stand of the appellant in this appeal.
10.1. In case of Vidarbha Iron and Steel Co, Ltd. Vs. Commissioner of Central Excise, Nagpur (supra), CESTAT Mumbai held that demand of service tax under the head of manpower recruitment and supply agency service is not sustainable saying that there was nothing on record to show that the appellant functioned as a commercial concern engaged in supply of manpower. This decision is certainly applicable to the facts of the present appeal. We quote below certain parts from this decision of CESTAT, Mumbai, which are relevant to the facts of the present appeal :-
6. The issue involved in this case is whether the amounts received by the appellant towards salary and other government dues are liable to service tax or otherwise under the category of "manpower recruitment and supply agency" service. It is undisputed that the amount received by the appellant is nothing but the reimbursement of salaries and other dues of the employees, who were on the muster role of appellant, as per the compromise scheme approved by High Court amounts as salaries paid by FACOR to appellant and to make payment to the employees.
6.1 The adjudicating authority has confirmed the demands on the ground that the agreement provides for payment of salaries and wages to the employees by FACOR to appellant for further payments, the role of the appellant as per compromise scheme was to supply staff, that they are discharging the tax liability on an amount received as a rent under the same agreement cannot take a stand that amount received towards the salaries is not taxable.
6.2 In our considered view, the stand of the adjudicating authority holding that the service tax liability arises is incorrect for more than one reason. Firstly, we find that clause 8 of the leave and licence agreement specifically states that the employees will be on the muster roll of the appellant and salaries to be paid by the appellant on receipt from FACOR. It is undisputed that the appellant had received only the actual dues towards the employees. Secondly, the arrangement of continuation of the services of the employees by FACOR was an arrangement approved by the Hon'ble High Court of the compromise scheme in order not to deprive the employees of their job and livelihood. Thirdly, there is nothing on record to show that the appellant functioned as a commercial concern engaged in supply of manpower to FACOR during the material period. In our view, the arrangement of the employees of appellant continuing the job and getting paid will be akin to the deputation of personnel to the FACOR. . 10.1.1. In the said decision, the CESTAT, Mumbai has quoted the Honble Gujarat High Courts decision in the case of Arvind Mills Ltd. [2014-TIOL-441HC-AHM-ST]. Paragraphs 5 and 6 of the said judgement of the Honble Gujarat High Court, we are quoting below for more enlightenment on the subject. In the said decision, the Honble Gujarat High Court inter alia observes as under :
5. It is true that in the present form, the definition of Manpower Supply Recruitment Agency is wide and would cover within its sweep range of activities provided therein. However, in the present case, such definition would not cover the activity of the respondent as rightly held by the Tribunal. To recall, the respondent in order to reduce his cost of manufacturing, deputed some of its staff to its subsidiaries or group companies for stipulated work or limited period. All throughout the control and supervision remained with the respondent. As pointed out by the respondent, company is not in the business of providing recruitment or supply of manpower. Actual cost incurred by the company in terms of salary, remuneration and perquisites is only reimbursed by the group companies. There is no element of profit or finance benefit. The subsidiary companies cannot be said to be their clients. Deputation of the employees was only for and in the interest of the company. There was no relation of agency and client. It was pointed out that the employee deputed did not exclusively work under the direction of supervision or control of subsidiary company. All throughout he would be under the continuous control and direction of the company.
6. We have to examine the definition of Manpower Supply Recruitment Agency in background of such undisputable facts. The definition though provides that Manpower Recruitment Supply Agency means any commercial concern engaged in providing any services directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client, in the present case, the respondent cannot be said to be a commercial concern engaged in providing such specified services to a client. It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied. In the present case, facts are to the contrary.
10.2. It would also be appropriate to quote here from Honble High Court of Allahabads judgement in the case of Computer Sciences Corporation India Pvt. Ltd.[2015(37) S.T.R. 62 (All.)], which has been quoted by CESTAT, Mumbai in Vidarbha Iron and Steel Co. Ltd. (supra). Honble Allahabad High Court in the said judgement in paragraphs 7 and 8 has observed as under :
"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 supply agency. Unless the critical requirements of clause (k) of Section 65(105) are fulfilled, the element of taxability would not arise [emphasis supplied].
10.3. As discussed earlier, it is mentioned again that even if the appellant (PTL) is called as service provider, we do not find any service recipient in this case as the personnel (manpower), who are manufacturing ATL brand tyres and tubes, continued and continues to be in the pay roll of the appellant (PTL) and from the documents on record, we cannot say that the appellant (PTL) has provided any service in relation to recruitment and supply of manpower in any manner temporarily or otherwise and the appellant company has never been and presently also not in the business of manpower supply or recruitment temporarily or otherwise, in any manner.
10.4. Further, CESTAT, Bangalore in the case of S.S. Associates Vs. C.C.E., Bangalore [2010 (19) STR 438 (Tri.-Bang)] also supports the case of the appellant. The CESTAT, Bangalore in the said case held that the facts in the case indicated that essence of contract was execution of work/job as per contract and invoice and there was no agreement for utilization of services of an individual. In the present appeal case also, it is clear that the other party to the contract, M/s ATL is principally only concerned with the use of the factory/plant of PTL for manufacturing tubes and tyres of their own brand and by using their own raw material; they were not directly concerned that who are the personnel manufacturing ATL brand tyres and tubes. As per Lease Agreement, they have made a clear mention that for this manufacturing they will pay the appellant (PTL) actual expenses on account of following five heads :
(i) Power and Fuel
(ii) Store and Spares
(iii) Repair and maintenance
(iv) Personnel cost
(v) Expenses under any other head relatable to production/manufacture of tyres/tubes.
This includes the expenses concerning personnel cost also. But this fact of reimbursement of actual expenses on personnel cost would not make this action as supply of manpower to M/s ATL by the appellant, PTL. In other words, this fact of reimbursement of expenses does not mean that the appellant (PTL) was supplying manpower to ATL and for which service tax is liable to be paid by the appellant on the money being reimbursed to them, when the appellant, PTL is not covered under the definition of manpower recruitment or supply agency service as per the provisions of Section 65 (105) (k) of the Finance Act, 1994, though this definition underwent different changes during the relevant period. The subject activities of the appellant have not fulfilled all the ingredients and conditions to cover them under the definition of manpower recruitment or supply agency.
11. The appellant has argued that even on the ground of revenue neutrality, they should not be charged any service tax. Revenue has argued that revenue neutrality cannot be a ground for non-levy of service tax, if the activity is otherwise covered under Service Tax law. We do not find any reason to consider this argument of revenue neutrality of the appellant or the counter argument of the Revenue that revenue neutrality cannot be a ground for non-levy of service tax as the subject activities and operations of the appellant have not fulfilled the ingredients of the definition of the manpower recruitment or supply agency service as per the provisions of Section 65 (105) (k) of the Finance Act, 1994, as discussed in earlier parts.
12. In respect of extended period of demand, the appellant has argued that they have not suppressed anything from the Revenue. From the facts, we find that there has not been any inaction or failure on the part of the appellant (PTL) or any deliberate withholding of information which can give a reason or a valid ground to the Revenue for demanding the duty beyond the normal period. Further, when the activities and operations of the appellant have not been strictly found to be covered by the definition of manpower recruitment and supply agency service, there is no need to further elaborate on this point.
13. The Revenue has tried to make a case to bring the subject activity and operations/transactions of the appellant within the definition of manpower recruitment and supply agency service. However, when facts on the ground and the documents indicate otherwise, the Revenue cannot sustain its case beyond mere statement and it cannot succeed legally.
14. Considering above discussions, analyses and the decisions quoted above, the appeal is allowed with consequential relief, if any, to the appellant.
(Pronounced in open court on ..)
(ASHOK K. ARYA) (S. S. GARG)
TECHNICAL MEMBER JUDICIAL MEMBER
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