2014 (9) TMI 482 - AT - Service Tax

Service tax not applicable to sugar factories' harvesting and transportation charges

The Tribunal ruled that demands for service tax liability on harvesting and transportation charges paid by sugar factories to the appellants were not ... Supply of manpower service or not - harvesting of sugarcane and transportation of sugarcane by trucks, tractors, head loads, etc. to the sugar factory - Held that:- the consideration is paid not on the supply of manpower but on the sugarcane supplied on tonnage basis. If an efficient contractor engages less manpower, he will make more profits while an inefficient contractor engaging more manpower would make less profits. In other words, since the consideration is received on the quantity of sugarcane delivered, the essential nature of service is the harvesting and supply of sugarcane. How the service is rendered is not relevant for classification of the service. In view of the decisions of this Tribunal in the case of Amrit Sanjivni Sugarcane Transport Co. Pvt. Ltd. [2013 (8) TMI 58 - CESTAT MUMBAI] and Samarth Sevabhavi Trust [2013 (8) TMI 218 - CESTAT MUMBAI], we hold that the impugned demands are not sustainable in law. - Decided in favor of assessee. Issues involved:Interpretation of service tax liability on harvesting and transportation charges paid by sugar factories to appellants.Analysis:1. Nature of Service Provided:The appellants entered agreements with sugar factories for harvesting and transporting sugarcane, receiving payments based on tonnage supplied. The issue was whether these activities constituted 'supply of manpower service' subject to service tax. The Revenue argued that even though no direct supply of manpower occurred, the work indirectly involved manpower engagement, justifying classification under 'supply of manpower.' The appellants contended that their role was intermediary, facilitating transactions through contractors, and the consideration was for harvesting and transportation, not manpower supply.2. Legal Interpretation:The Tribunal analyzed statutory definitions and contracts, concluding that the appellants were not recruitment agencies. The consideration was based on sugarcane tonnage, not manpower supply, indicating the essential nature of the service was harvesting and supply of sugarcane, not manpower recruitment. The Tribunal emphasized that the mere requirement of manpower in service activities did not constitute 'manpower supply service.' The contracts showed no element of manpower supply or recruitment, leading to the dismissal of demands based on manpower supply service classification.3. Classification under Business Auxiliary Service (BAS):The Tribunal determined that the appellants' activities fell under BAS, involving services incidental to procurement of goods, such as sugarcane, for the client, the sugar factory. The harvesting and transportation services provided by the appellants were considered ancillary to the procurement of goods, aligning with the definition of BAS. Referring to previous Tribunal decisions, the Tribunal held that demands categorized under manpower supply service were unsustainable, further supporting the dismissal of the demands.4. Tribunal's Decision:Based on the legal analysis and precedents, the Tribunal ruled that the demands were not sustainable in law. Consequently, the demands were set aside, and the appeals were allowed. The Tribunal highlighted that refunds, if applicable, should be considered by the department in accordance with the law. The decision focused on the legal interpretation of the services provided by the appellants, emphasizing the absence of manpower supply elements and the alignment with BAS classification.This detailed analysis of the judgment highlights the legal intricacies involved in determining the service tax liability on harvesting and transportation charges, providing a comprehensive overview of the issues addressed and the Tribunal's decision.