2013 (12) TMI 430 - AT - Service Tax

CESTAT rules in favor of appellants in service tax case, emphasizing principal-to-principal transport services.

The Appellate Tribunal CESTAT NEW DELHI ruled in favor of the appellants in a case concerning the confirmation of service tax for allegedly providing ... Waiver of pre deposit - Demand confirmed on the ground that manpower service provided to M/s. Punjab Tractors Ltd. - Held that:- appellants are not merely supplying the drivers to the M/s. Punjab Tractors Ltd. in which case the letter referred to by the adjudicating authority may be held to be ‘prima facie’ applicable. In the present case, the agreement between the appellants and the receiver is for transporting the vehicle manufactured by them on principal to principal basis and for a consideration, which is based upon the per km run of the vehicle. As such, at this prima facie stage, we agree with learned Advocate that that the activity undertaken by the appellant cannot be held to be falling under the manpower supply agency so as to tax the same under the said category - stay granted. Issues:Confirmation of service tax against the appellants for providing manpower service to a company. Interpretation of an agreement for transporting vehicles and engaging drivers. Determination of whether the activity falls under the category of manpower supply agency for taxation purposes.Analysis:The judgment by the Appellate Tribunal CESTAT NEW DELHI dealt with the confirmation of service tax against the applicants for allegedly providing manpower service to a company. The appellants argued that they were engaged in transporting vehicles manufactured by the company to various depots, and they had their own drivers for this purpose. The agreement between the parties outlined the terms, including rates on a per km basis, expenses coverage, and responsibilities in case of accidents. The Revenue relied on a Board's letter categorizing providing drivers for vehicles as a service under manpower recruitment or supply agency.Upon careful consideration, the Tribunal found that the appellants were not simply supplying drivers but were engaged in transporting vehicles on a principal to principal basis for a consideration based on the distance covered. The Tribunal agreed with the appellants that the activity did not fall under the category of manpower supply agency for taxation. Therefore, the Tribunal dispensed with the condition of pre-deposit in both cases, indicating a favorable decision for the appellants based on the interpretation of the agreement and the nature of the services provided.This judgment highlights the importance of analyzing the nature of services provided under specific agreements to determine the applicability of tax categories. It emphasizes that the substance of the activity should be considered over mere technicalities to ascertain the correct tax treatment. The decision provides clarity on distinguishing between services like manpower supply agency and transportation services based on the underlying agreements and operational arrangements.