2021 (5) TMI 802 - AT - Service Tax

Tribunal rules converting raw materials into soap not a service under Manpower Recruitment

Sureel Enterpries Pvt. Ltd. Versus C.C.E. & S.T. -Bhavnagar

The Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing the appeals. The Tribunal found that the appellant's activity ... Classification of services - Manpower Recruitment Agency Service - conversion of raw material to soap and detergent on behalf of M/s Nirma Limited in the factory of M/s Nirma Limited - HELD THAT:- Very identical issue in the appellant's own case for the previous period i.e. June 2005 to June 2010 was considered by this Tribunal in Service Tax Appeal Nos. 2327 of 2011, 768 of 2011 and 10391 of 2013. In these appeals this Tribunal has passed a Final Order in MESSERS SUREEL ENTERPRISE PVT. LTD., M/S. SUREEL ENTERPRISE P. LTD. VERSUS C.C.E. & S. T- AHMEDABAD-III [2019 (10) TMI 1245 - CESTAT AHMEDABAD] whereby it was held that the appellant's activities amount to manufacture and does not amount to service of Manpower Recruitment Agency Service. Accordingly, the appeals were allowed. This Tribunal following various judgment namely, RAMESHCHANDRA C. PATEL VERSUS COMMR. OF SERVICE TAX, AHMEDABAD [2011 (11) TMI 415 - CESTAT, AHMEDABAD], JUBILANT INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., GHAZIABAD [2013 (9) TMI 358 - CESTAT NEW DELHI] and Shiv Narayan Bansal [2013 (12) TMI 733 - CESTAT NEW DELHI] held that contract between the appellant and M/s Nirma Limited is of contract manufacturing hence demand under manpower supply cannot be made. Appeal allowed - decided in favor of appellant. Issues:1. Whether the activity of the appellant, involving the conversion of raw material into soap and detergent for M/s Nirma Limited, constitutes a provision of service classifiable under Manpower Recruitment Agency Service.Analysis:Issue 1:The case involved the appellant entering into agreements with M/s Nirma Limited for the conversion of raw materials into synthetic detergent, soaps, and detergents at different factory locations. The appellant produced these products utilizing materials provided by M/s Nirma and issued bills based on the quantity produced. Show cause notices were issued demanding service tax on the contract manufacturing undertaken at M/s Nirma's factory. The original orders dropped the demand, but the Commissioner (Appeals) set them aside, leading to the appeals before the Tribunal.Issue 2:The appellant's counsel argued that a previous Tribunal order in a similar case favored the appellant, and since there were no changes in circumstances, the present appeals should also be allowed. The counsel cited various judgments to support their argument. On the other hand, the Revenue representative reiterated the findings of the impugned order.Issue 3:Upon careful consideration of submissions, the Tribunal analyzed whether the appellant's activity of converting raw material into soap and detergent for M/s Nirma amounted to service classifiable under Manpower Recruitment Agency Service. Referring to a previous order, the Tribunal found that the appellant's activities constituted manufacturing and not service under the Manpower Recruitment Agency Service category. The Tribunal emphasized that the contract between the appellant and M/s Nirma was for contract manufacturing, and hence, no demand under manpower supply could be made.Issue 4:The Tribunal highlighted that the issue had been settled in the appellant's previous case for a different period, where it was held that the appellant's activities did not fall under the Manpower Recruitment Agency Service. The Tribunal noted that the appellant's argument regarding a revenue-neutral situation was considered, but the decision was made on the merit of the case. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief, if any, in accordance with the law.Issue 5:Based on the Tribunal's previous decision in the appellant's case on the same issue, the Tribunal found that the issue in the present case was no longer res integra. Despite a difference in the period, the facts and legal points remained unchanged, making the previous decision applicable to the present case. Therefore, the impugned orders were set aside, and the appeals were allowed.In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned orders and allowing the appeals based on the precedent established in the appellant's previous case and the nature of the activities undertaken by the appellant for M/s Nirma Limited.