Packing and loading services for dairy cooperative not taxable as manpower supply agency services

CESTAT Ahmedabad ruled in favor of appellant who performed packing/filling of milk pouches, loading/unloading of crates for a dairy cooperative on rate contract basis from 2010-15. The tribunal held that activities were not classifiable as Manpower Recruitment or Supply Agency Services since contract was for specific jobs with per-piece rates, not manpower supply. For pre-July 2012 period, no service tax was payable. Post-July 2012, activities qualified as manufacturing under Central Excise Act and were exempt under notification provisions. Appeal allowed, impugned order set aside.

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Issues:
Classification of service provided by the appellant under "Manpower Recruitment or Supply Agency Services" for the period up to 30.06.2012 and post 01.07.2012.

Analysis:
The case involved the appellant providing services such as packing/filling of milk pouches, loading/unloading of crates, and ancillary activities to a client on a rate contract basis. The department alleged that the services fell under "Manpower Recruitment or Supply Agency Services" and issued a show cause notice demanding Service Tax, interest, and penalty. The appellant contended that their activities amounted to manufacturing under the Central Excise Act, 1944, and therefore were not liable for service tax. The contract with the client was specifically for particular jobs on a per-piece basis, not for the supply of manpower, as evidenced by various judgments cited by the appellant's counsel.

The Tribunal examined the contract between the appellant and the client and found that the nature of the work was specific to tasks like filling and packing of milk pouches, loading/unloading of crates, and ancillary activities, with the rate being based on the quantum of work, not on the number of manpower or manhours involved. Citing precedents like M/s. S.S. Associates and M/s. Divya Enterprises, the Tribunal concluded that the appellant's services did not fall under "Manpower Recruitment or Supply Agency Services" up to 30.06.2012, and hence no service tax was payable for that period.

Regarding the period from 01.07.2012, the Tribunal noted the shift to a negative list regime where all activities were taxable unless exempted. The appellant's activities were deemed as manufacturing under the Central Excise Act, 1944, specifically related to packing of milk pouches, which rendered the product marketable. The Tribunal relied on exemption Notification No. 25/2012-ST and concluded that the appellant's activities were exempted under Sr. No. 30(i) as they amounted to a process of manufacture. Therefore, no service tax was payable by the appellant for the period post 01.07.2012 as well.

In light of the above analysis, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

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