2023 (5) TMI 245 - AT - Service Tax

Classification of services - manpower supply services or Business Auxiliary Service (BAS) - unloading of raw materials and other materials, loading of finished goods as required by the management and housekeeping in and around the factory, maintenance of garden and canteen and maintenance of machineries and other equipment - applicability of N/N. 8/2005-ST dated 01.03.2005 - penalties - HELD THAT:- The contractor shall provide to his personnel, at his own cost, uniforms, shoes, monsoon wear, and any other essential equipment and tools such as brooms, scrubbers, detergent etc. as may be required to provide proper packing, loading/unloading, cleaning and maintenance and the contractor is required to pay to his employees all dues as per the provisions of the Payment of Wages Act 1936 and the wages paid should not be less than the Minimum Wages Act. The contractor is responsible for deducting and remitting provident fund and ESI contributions and also for payment of bonus and other dues, and also shall require to maintain records and registers, obtain any license or registration required by law for supply of workmen/labour - All these conditions will indicate that the consideration paid for the services is depending upon the number of people deployed in the factory of M/s. Godrej by the appellant. The service charges paid are computed on the basis of the wages paid by the appellant plus pre-determined commission. Even the scrutiny of the bill raised by the appellant indicates that the charges are on the basis of number of workmen deployed.

The tenor of the contract clearly indicate that the Agreement entered into by the appellant’s with M/s. Godrej Household Products Ltd., Karaikal, is a “Labour Supply Contract” and so the services rendered would fall under “Manpower Recruitment or Supply Agency” service - demand of tax upheld.

The appellant’s reliance on the decisions rendered by the Tribunal in the case of DIVYA ENTERPRISES VERSUS COMMISSIONER OF CENTRAL EXCISE, MANGALORE [2009 (12) TMI 155 - CESTAT, BANGALORE] and RITESH ENTERPRISES VERSUS COMMISSIONER OF CENTRAL EXCISE [2009 (10) TMI 182 - CESTAT, BANGALORE] are not applicable to the facts of the case as the contracts involved there in were for execution of work on piece rate basis.

Penalty - HELD THAT:- M/s. Godrej is computing the service charges payable to the appellants on the basis of sum total of wages paid to the workers employed plus cost of uniform, shoes, monsoon wear, detergents etc. According to the agreement, the appellant was paid service charges of Rs.7/- per manpower for 8 hours shift. On these peculiar facts of this case, computation of tax should be with reference to the service charges paid to the appellant. Considering the appellant being a small entrepreneur and there was confusion as to the classification of many services under various clauses of Section 67 of the Finance Act, 1994, penalties imposed are set aside.

The demand of service tax on the service charges paid to the appellant is upheld and penalties imposed are set aside - appeal allowed in part.