AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 996
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....Sick Industrial Companies (Special Provisions) Act, 1985. The BIFR passed an order dated 17.4.1995 sanctioning the Scheme for take over of the appellant company by M/s Apollo Tyres Limited (ATL). 2.1. Consequent to BIFR sanctioned Scheme, appellant s factory was leased out by the appellant to M/s Apollo Tyres Ltd.(ATL) under a Lease Agreement dated 14.5.2005 and the appellant paid service tax on the lease rental received from ATL under the category of Renting of Immovable Property . 2.2. Consequent to the BIFR sanctioned Scheme, workers engaged in production in the appellant s factory entered into a fresh Agreement (Supplementary Agreement) with respect to their continued engagement in production of tyres at the appellant s factory, where the appellant (PTL) was manufacturing tyres and tubes for ATL under the brand name of ATL. Consequent to the BIFR Scheme, the Lease Agreement was signed between the appellant (PTL) and Apollo Tyres Ltd. (ATL) on May 14, 2005. In the Lease Agreement, it was inter-alia mentioned that in addition to payment of lease rental, ATL will reimburse to the appellant, PTL the actual expenses for the following : (a) Power and Fuel (b) ....
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....rendering any service. ATL merely provides / renders quality related management / supervisory assistance and PTL actually carries out the manufacturing operations at its factory. In such a situation there can be no question of any service being rendered either way and a contrary view will result in a situation of rendering service to oneself. (vi) The subsequent Lease Agreement further reiterate and contemplate continuing the joint operation arrangement as between ATL and PTL. This again emphasizes that there is no transfer or loaning of personnel by PTL to ATL and hence there is no question of any manpower supply. In this context, it is pertinent to mention that the show-cause notice refers to manpower recruitment services which cannot arise in the facts and circumstances of the present case. (vii) Without prejudice to the above, during the period upto 22.3.2006, PTL was a subsidiary of ATL. During the said period in any case there can be no question of any service. Even thereafter as afore-mentioned in view of the clear provisions for joint operation the question of any service by one to the other cannot arise. In the facts and circumstances, there is no service that can be....
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....totally unsubstantiated and erroneous alleging willful suppression. The allegation of willful suppression and intention to evade payment of service is unsustainable. (ii) There can be no question of loaning or even supply of personnel in an integrated and interdependent activity of manufacture of tyres by the appellant by using its infrastructure including its workers at the appellant s factory. (iii) The Respondent Commissioner failed to note that any service tax paid by the appellant as a manpower supply agency to ATL would then be available in the hands of ATL as an input Service Credit. Undisputedly the exercise was therefore revenue neutral and the question of any demand leave alone invoking the extended period clearly did not arise. (iv) The entire facts were within the knowledge of the department. The mere fact that the disputed tax was not paid obviously on the bonafide and correct premise that there is no supply of manpower but only a continued engagement of the appellant s labour by the appellant for its manufacturing activity and the reimbursement of the entire manufacturing expenses by ATL cannot lead to an allegation/conclusion of suppression on the part of....
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....enue neutrality cannot be an argument for non-levy of service tax when the appellant was paying service tax under the category of renting of immovable property on the lease rentals received by them. The appellant cannot argue that they have not suppressed the fact of manpower supply to M/s ATL, when they were not paying any service tax on the money received as reimbursement for manpower supply to ATL. (ii) All ingredients for payment of service tax i.e. service provider, service recipient and service activity have been fulfilled as service provider is appellant and service recipient is ATL and service is manpower supply . 7. All the facts of the subject appeal case available on record and the submissions of both the sides have been carefully considered. 8. We find that this is not an ordinary case but a special case where there have special arrangements and systems been laid down under a Special Scheme (BIFR approved Scheme), which is evident from the various documents available on record. 8.1. The appellant s operations had become non-profitable further leading to erosion in its net worth. Consequently, appellant s operations were referred to BIFR under the provisions ....
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....e, in any manner, After the amendment with effect from 16-05-2008 the charging provision under Section 65 (105) (k) of the Finance Act, 1994 reads as follows : Section 65(105) [(k) [to any person], by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner;] 9.1. After reading the definition(s) of manpower recruitment / supply agency service , the main ingredients of said definition(s) are as follows : (i) Service provider (ii) Service recipient (iii) Provision of making the availability of manpower Further, this availability of manpower for the services can be temporary or other than temporary. 9.2. When one examines overall facts available on the record, strictly speaking one does not find that there has been any manpower supply made either to M/s ATL or to anybody else as workers / manpower working within the premises of the appellant s factory continued to work as earlier i.e. prior to the date of Lease Agreement dated 14-5-2005 wherein in the clause 4 (d), it has been mentioned that M/s ATL will reimburse actual expenses on account ....
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....present; and NOW THEREFORE THIS AGREEMENT IS ENTERED INTO BETWEEN ATL AND PTL ON THE FOLLOWING TERMS AND CONDITIONS :- .. .. .. 9.4. We have carefully examined the said Lease Agreement and the facts on record. The facts and the contents of the Lease Agreement do not lead us to conclude that there has been a manpower supply by the appellant (PTL) to Apollo Tyres Ltd. (ATL) for manufacturing ATL brand of tyres and tubes. There were joint operations going on in the interest of both the parties including in the interest of employees/workmen (manpower) so that the employees/workmen could continue to earn their livelihood and further, the appellant company does not get permanently sick and get closed. By examining all the documents on record and the ground realities including the facts on record do not lead us to agree with the premise of the Revenue that the appellant was supplying manpower to M/s ATL to cover the activity of manufacturing of ATL brand tyres and tubes by personnel belonging to the appellant (PTL) under the category of taxable service of manpower supply service which ....
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.... receipt from FACOR. It is undisputed that the appellant had received only the actual dues towards the employees. Secondly, the arrangement of continuation of the services of the employees by FACOR was an arrangement approved by the Hon'ble High Court of the compromise scheme in order not to deprive the employees of their job and livelihood. Thirdly, there is nothing on record to show that the appellant functioned as a commercial concern engaged in supply of manpower to FACOR during the material period. In our view, the arrangement of the employees of appellant continuing the job and getting paid will be akin to the deputation of personnel to the FACOR. . 10.1.1. In the said decision, the CESTAT, Mumbai has quoted the Hon ble Gujarat High Court s decision in the case of Arvind Mills Ltd. [2014-TIOL-441 HC-AHM-ST]. Paragraphs 5 and 6 of the said judgement of the Hon ble Gujarat High Court, we are quoting below for more enlightenment on the subject. In the said decision, the Hon ble Gujarat High Court inter alia observes as under : "5. It is true that in the present form, the definition of Manpower Supply Recruitment Agency is wide and would cover within its sweep ran....
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....to be a taxable service within the meaning of Section 65(105 )( k), the service must meet the following requirements: (i) there has to be a service provided or to be provided to any person; (ii) the service has to be provided by a manpower recruitment or supply agency; and (iii) the service must be provided in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner. 8. In the present case, the Commissioner clearly missed the requirement that the service which is provided or to be provided, must be by a manpower recruitment or supply agency. Moreover, such a service has to be in relation to the supply of manpower. The assessee obtained from its group companies directly or by transfer of the employees, the services of expatriate employees. The assessee paid the salaries of the employees in India, deducted tax and contributed to statutory social security benefits such as provident fund. The assessee was also required to remit contributions, which had to be paid towards social security and other benefits that were payable to the account of the employees under the laws of the foreign jurisdiction. There was no basis ....
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....s does not mean that the appellant (PTL) was supplying manpower to ATL and for which service tax is liable to be paid by the appellant on the money being reimbursed to them, when the appellant, PTL is not covered under the definition of manpower recruitment or supply agency service as per the provisions of Section 65 (105) (k) of the Finance Act, 1994, though this definition underwent different changes during the relevant period. The subject activities of the appellant have not fulfilled all the ingredients and conditions to cover them under the definition of manpower recruitment or supply agency . 11. The appellant has argued that even on the ground of revenue neutrality, they should not be charged any service tax. Revenue has argued that revenue neutrality cannot be a ground for non-levy of service tax, if the activity is otherwise covered under Service Tax law. We do not find any reason to consider this argument of revenue neutrality of the appellant or the counter argument of the Revenue that revenue neutrality cannot be a ground for non-levy of service tax as the subject activities and operations of the appellant have not fulfilled the ingredients of the definition of the m....