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Issues: Whether the appellant was liable to service tax under manpower recruitment and supply agency service on amounts received in respect of its permanent employees when the distillery plant was leased to another concern for running the same manufacturing activity.
Analysis: The arrangement was a lease of the plant and machinery for financial reasons, with the appellant's permanent employees continuing in the same manufacturing activity under the lessee's supervision. The amounts received represented salaries and related deductions handled on behalf of the employees, not consideration for supplying manpower as an independent taxable service. The demand had been computed on the gross amount without proper appreciation of the agreement or the nature of the arrangement, and the penalties and interest were founded on the same incorrect premise.
Conclusion: The appellant was not liable to service tax as a manpower recruitment and supply agency, and the demand, interest, and penalties were unsustainable.
Ratio Decidendi: Leasing a running industrial unit with its permanent employees to another operator, where the employees continue the same work under the lessee's supervision and the receipts are only salary-related reimbursements, does not amount to manpower recruitment and supply agency service.
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