2013 (8) TMI 218 - AT - Service Tax

Tribunal Rules in Favor of Trust on Service Tax Classification Dispute

The Tribunal ruled in favor of the Trust, holding that the services provided for cutting/harvesting sugarcane and transportation were classified under ... Service of 'manpower supply' - cutting/harvesting of sugarcane and transportation of the same from the farmers' fields to the sugar factory – Held that:- From the agreement dated 2.1.2006 with the sugar factory, it is seen that the same is for cutting and transportation of sugarcane from the farmer's fields to the sugar factory, who have agreed to sell their sugarcane to the sugar factory. The agreement is not for supply of any labour. The rates agreed upon for the said work are per tonnage of sugarcane supply, both for harvesting as well as transportation. This would clearly indicate that the activity undertaken cannot, by any stretch of imagination, be called supply of manpower. Held that:- Agreement entered into between the Trust and the transporters is for the transporter to engage labour for harvesting and transporting the sugarcane to the sugar factory and the rates agreed to be paid are on tonnage basis of the sugarcane supplied and not for the supply of any manpower. From these agreements, it is obvious that no manpower has been supplied by the appellant to the sugar factory to constitute supply of manpower. Also, as per decision in the case of Amrit Sanjivni Sugarcane Transport Co. Pvt. Ltd. [2013 (8) TMI 58 - CESTAT MUMBAI], it has been held that harvesting of sugarcane and transportation thereof to the sugar factory from the farmers' fields would not come under the purview of manpower recruitment or supply agency service and would be more appropriately classifiable under 'business auxiliary services' - The demand has to be made in accordance with law, taking into account the contracts entered into by the appellant with the various parties involved in the transaction. The demands cannot be confirmed on the basis of a wrong understanding entertained by the appellant or anybody else – Decided in favor of Assessee. Issues:Classification of service under 'manpower supply services' vs. 'business auxiliary services' for activities related to cutting/harvesting of sugarcane and transportation.Analysis:The appeal involved a dispute regarding the classification of services provided by a Trust for cutting/harvesting sugarcane and transportation to a sugar factory. The Commissioner contended that the activity amounted to taxable service of 'manpower supply,' leading to a service tax demand on the Trust. The Trust argued that the services rendered were not for supplying labor but for specific activities based on tonnage of sugarcane supplied, thus falling under 'business auxiliary services.' The Tribunal examined the agreements between the Trust, sugar factory, and transporters. It was noted that the Trust did not supply labor directly but engaged transporters responsible for harvesting and transportation. The agreements were based on tonnage of sugarcane supplied, indicating no supply of manpower by the Trust. Reference was made to Section 65(105)(k) of the Finance Act, defining taxable service as recruitment or supply of manpower, which was not evident in the Trust's activities. The Tribunal cited a previous case where similar activities were classified under 'business auxiliary services,' supporting the Trust's argument. The Tribunal emphasized that mere statements admitting manpower supply were insufficient for tax liability determination, stressing the need to consider contractual agreements. Consequently, the impugned order demanding service tax was deemed unsustainable, and the appeal was allowed. The Tribunal directed the department to refund the pre-deposit made by the Trust without further delay.