2026 (2) TMI 604 - AT - Service Tax

Manpower supply for rake movement found to be reverse charge manpower recruitment service, supplier not liable for confirmed service tax demand

Services for deployment of ex-railway staff constituted manpower recruitment and supply agency services; therefore tax liability falls on the service ... Manpower Recruitment/Supply Agency Services - classification of service - Cargo Handling Service - Reverse Charge Mechanism - Charging Section and levy u/s 66B - definition of ‘Cargo Handling Service’ - Requirement of examination before issuance of show cause notice based on third party information - Application of negative list and exemptions - HELD THAT:- ‘Cargo Handling Service’ has not been defined in the Act but is defined in Circular No. B11/1/2002-TRU, dated 01-082002 as the services of transporting coupled with loading, unloading, packing, unpacking can be called as ‘Cargo Handling Service’ if those are done by the authorities as that of Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations etc. Apparently and admittedly the appellant herein is none of these kinds of companies. In the Larger Bench decision of the Tribunal rendered in the case of M/s Atma Steels Pvt. Ltd. & Others v. CCE, Chandigarh & Others [1984 (6) TMI 60 - CEGAT, NEW DELHI-LB], it was held that once the provisions has been changed, then the existing provisions at the time of issue of SCN should be applicable and not the earlier provisions. Charging Section 66B of Finance Act, 1994 provides for levy of service tax at a specified percentage on the value of service. Section 67 of Finance Act provides that where service tax is chargeable on any taxable service with reference to its value and such value shall be consideration in money charged by the service provider. Therefore, it is primarily important to determine the value on which service tax shall be levied at a specified percentage and such value should be the value of taxable service. Clause (44) of Section 65B of Finance Act, 1994 has provided for definition of service and it has elaborately dealt with a list of activities which shall not be included in such definition. Further, Section 66D of Finance Act, 1994 has provided for negative list of services where the activities provided covered by such negative list do not qualify to be a taxable service. Therefore, it is clear that while determining the value of taxable service under Section 67 ibid, such aspect as to the activities which are covered by negative list and activities which are mentioned in the definition of service as those which are not covered by such definition become important. Therefore, amount of service tax not paid or not levied arriving at correct value of taxable service which has not suffered service tax needs to be determined as the first step. Further, there are services where entire or part of service tax is to be paid by service recipient. In addition, mega exemption Notification No. 25/2012ST dated 20.06.2012 has provided exemption to various activities from the levy of service tax. Therefore, unless the data is examined with reference to all the above stated aspects, no one can come to a conclusion about the exact value which has not suffered service tax. Such exercise has not been undertaken in the present case. Thus, impugned order is not sustainable. The impugned order is set aside and the Appeal filed by the Appellant is allowed. Issues: Whether the services rendered by the appellant, under the work order for deployment of ex-railway staff for rake movement, are to be classified as manpower recruitment/supply agency services attracting reverse charge mechanism and therefore whether the departmental demand for service tax, interest and penalty against the appellant is sustainable.Analysis: The Tribunal examined the scope and terms of the work order which expressly required deployment of ex-railway staff, substitution for absenteeism, and personal supervision, indicating a contract for supply of manpower. The Tribunal analysed the legal contours of 'cargo handling service' as defined in Section 65(23) of the Finance Act, 1994 and relevant circulars and case-law, observing that cargo handling services require the existence of cargo accepted by a carrier and are typically performed by specialised cargo handling agencies; ordinary manpower deployment for rake movement does not ipso facto constitute cargo handling service. The Tribunal noted the applicability of Notification No. 30/2012-Service Tax dated 20.06.2012 (as amended by Notification No. 07/2015-Service Tax dated 01.03.2015) which places tax liability on the service recipient for supply of manpower to a body corporate. The Tribunal further observed that post-01.07.2012 charging provisions and the negative list framework (Sections 66B, 66D, 67 and related definitions) must be applied as existing at the time of the show cause notice and that the adjudicating authority failed to properly examine records, contractual terms, exemptions and the correct value of taxable service before confirming demand, interest and penalty. The Tribunal also relied on precedent holding that demands cannot be confirmed under deleted or inapplicable provisions and that executive authorities must verify audit discrepancies with reference to books and admissible evidence before issuing demands.Conclusion: The Tribunal concluded that the services performed by the appellant fall within manpower recruitment/supply agency services and, on the facts and documents, the tax liability in respect of such services was to be borne by the service recipient under the reverse charge mechanism as per Notification No. 30/2012-Service Tax read with Notification No. 07/2015-Service Tax. The impugned order confirming demand, interest and penalties against the appellant was unsustainable. The impugned order is set aside and the appellant's appeal is allowed.