No manpower supply service and no consideration meant service tax demand and penalties could not survive.

No manpower supply service was found where a factory taken over by a secured creditor was leased under a tripartite arrangement and the lessee undertook to retain the existing employees and pay their wages directly. On those facts, the appellant was not rendering manpower supply to the lessee, and no consideration was received for any alleged service. In the absence of both rendition of a taxable service and consideration, service tax could not be levied. The demand of service tax and the connected penalties were therefore held unsustainable and set aside in favour of the assessee.

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Issues: Whether the appellant rendered manpower supply service to the lessee so as to attract service tax, and whether service tax could be demanded in the absence of any consideration received by the appellant.

Analysis: The factory had been taken over by the secured creditor under Section 13(2) of the SARFAESI Act, 2002 and leased to the lessee under a tripartite arrangement. The lessee undertook to continue the existing employees and pay their salaries and wages directly. On these facts, the appellant did not provide manpower supply to the lessee. The record also showed that no consideration was received by the appellant for any alleged service. In the absence of both rendition of the taxable service and consideration, the levy of service tax could not be sustained.

Conclusion: The demand of service tax and the connected penalties were not sustainable and were set aside in favour of the assessee.

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