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2016 (7) TMI 996 - CESTAT BANGALORE

2016 (7) TMI 996 - CESTAT BANGALORE - 2016 (45) S.T.R. 273 (Tri. - Bang.) - Manpower supply services or not - 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 including the cost of personal. - Held that:- even if the appellant (PTL) is called as servic .....

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cruitment temporarily or otherwise, in any manner. - 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 .....

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ts 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 - Shri S. S. Garg, JM And Shri Ashok K. Arya, Technical For the Appellant Mr. Joseph Kodianthara, Sr. Advocate For the Respondent : Shri. Mohd. Yusuf, A.R. ORDER Per Ashok K. Arya The matter c .....

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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, appellant s 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 pai .....

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greement 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 penalt .....

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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 a .....

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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 i .....

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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 .....

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tioned 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 pro .....

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ease 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 activity for manufacture of tyres for and on behalf of ATL and under the ATL br .....

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ruitment 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 a .....

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ere 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 appellant s 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 .....

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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. C .....

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es 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 be .....

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x 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 th .....

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llant s 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 appellant s 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 app .....

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lows : (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- .....

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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, .....

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ade either to M/s ATL or to anybody else as workers / manpower working within the premises of the appellant s 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 .....

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pecial 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 th .....

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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 par .....

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e 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 acti .....

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eviability 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 d .....

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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 w .....

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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 .....

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subject. In the said decision, the Hon ble 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 sub .....

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ion 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 .....

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r 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 Hon ble High Court of Allahabad s 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). .....

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se, 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 so .....

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ection 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 servi .....

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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 L .....

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y 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 c .....

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