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2016 (7) TMI 996

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..... f 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. 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. - Demand set aside - Decided in favor of assessee. - ST/26969/2013-DB, ST/26970/2013-DB, ST/662/2012-DB - Final Order Nos. 20419 to 20421 / 2016 - Dated:- 1-7-2016 .....

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..... 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 ₹ 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 e .....

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..... 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 appellant s 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 ₹ 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 appellant s factory which was engaged in the manufacture of tyres continued such manufacturing / production act .....

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..... l 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 .....

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..... 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 appellant s factory. It is the fact that the appellant s 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 fu .....

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..... 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 t .....

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..... nable 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 l .....

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..... idiary 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 s .....

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..... n 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 an .....

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