Custom, Excise & Service Tax Tribunal
M/S. Carborundum Universal Ltd vs Cce & St, Ltu, Chennai on 16 January, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
ST/233/2010
(Arising out of Order-in-Appeal No. 17/2010 dated 25.02.2010 passed by the Commissioner of Central Excise and Service Tax (Appeals) LTU, Chennai
M/s. Carborundum Universal Ltd. : Appellant
Vs.
CCE & ST, LTU, Chennai : Respondent
Appearance Shri M. Kannan, Advocate, for the Appellant Shri Arul C. Durairaj, Supdt., (AR) for the Respondent.
CORAM:
Honble Ms. Sulekha Beevi, Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing/Decision: 16.01.2018 FINAL ORDER No. 40128/2018 Per Bench Brief facts are that the appellants who have registered office at Parry House, Moore Street, Chennai, have manufacturing units and depots at various places in India. Besides the manufacturing activities they also render Management Consultancy/Advise to their group companies and are paying service tax on the charges received from such companies. In addition, they also depute their senior officers/ management personnel to their associate/group companies for rendering advise and technical service assistance and received reimbursement of their salaries from their client companies. They were not discharging service tax on such reimbursement of salaries received by them. SCN was received proposing to demand service tax under the category of management consultancy service for the period 01.04.2004 to 31.03.2008. With effect from 16.06.2005 Manpower recruitment service was categorised as a separate service and a corrigendum to the SCN was issued for the period after 16.06.2005, proposing to demand service tax under the category of Manpower recruitment or supply agency service. After due process of law, the original authority confirmed the service tax under management consultancy service for the period 01.04.2004 to 15.06.2005 and under manpower recruitment or supply agency service from 16.06.2005 to 31.03.2008 along with interest and also imposed penalties. In appeal, the Commissioner (Appeals) upheld the confirmation of demand under manpower recruitment or supply agency service for the period 16.06.2005 to 31.03.2008 along with interest and penalties. Aggrieved, the appellants are now before the Tribunal.
2. On behalf of the appellants, the Ld. Counsel, Shri M. Kannan submitted that the appellant was only deputing the employees to its group companies and the said activities cannot be classified as a service rendered under manpower recruitment and supply agency service. He submitted that the said issue is decided in the following cases:-
i) CST Vs. Arvind Mills Ltd.
2014 (35) STR 496 (Guj.)
ii) Aircel Ltd. Vs. CCE, Coimbatore 2017 (10) TMI 349 CESTAT-Chennai
iii) Spirax Marshall Pvt. Ltd. Vs. CCE, Pune 2016 (44) STR 310 (Tri.-Mum.)
iv) CCE Vs. Krohne Marshall Pvt. Ltd.
2016 (44) STR J153 (S.C.)
3. The Ld. AR, Shri Arul C. Durairaj, Supdt., reiterated the findings in the impugned order.
4. Heard both sides.
5.1 The undisputed fact is that the appellants in their course of business deputed some of their personnel to their group companies. The department has raised the demand holding that these activities would fall under the category of manpower recruitment and supply agency service. The issue stands decided by the decision by the decision of the Honble High Court of Gujarat in the case of Arvind Mills Ltd. (supra). The relevant portion is reproduced as under:-
4.?Counsel for the Revenue vehemently contended that the definition of Manpower Supply Recruitment Agency is very wide and would include range of activities of supply of manpower either temporarily or permanently. He submitted that sizable manpower was required for the respondent from the group companies for deputation of the staff. He drew our attention to the amendment of such definition to contend that after the amendment, the definition was widened.
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. 5.2 This Tribunal in the case of Aircel Ltd., (supra) had occasion to analyze a similar issue and following the decision in the case of Arvind Mills Ltd., has held the issue in favour of the assessee. Mumbai Bench of the Tribunal in Spirax Marshall Pvt. Ltd. (supra) had also decided a similar issue following the decision in the case of Arvind Mills Ltd. The said decision was maintained by the Honble Supreme Court as reported in Commissioner Vs. Krohne Marshall Pvt. Ltd. 2016 (44) STR J153 (S.C.).
6. Following the above decisions and appreciating the facts presented before us, we are of the view that the demand is unsustainable. The impugned order is set aside and the appeal is allowed with consequential reliefs to the appellants.
(Operative part of the Order pronounced in the open Court) (MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.) MEMBER (TECHNICAL) MEMBER (JUDICIAL) BB 5