TaxTMI 
TaxTMI 
2026 (6) TMI 178
X X X X Extracts X X X X
X X X X Extracts X X X X
....04.2019 passed by the Commissioner (Appeals), Coimbatore (hereinafter referred to as the "Impugned Order2"), whereby the demands confirmed by the adjudicating authority for the subsequent period were upheld. Both the impugned orders deal with identical issues and are therefore clubbed together for a common decision. 2. The brief facts are that the Appellant, engaged in tea plantation and owning estates at Mount Stuart and Waverly Estates, Valparai, entered into a Lease Agreement dated 30.10.2009 with M/s. Waterfall Estate Pvt. Ltd. for carrying out plantation activities. Pursuant to investigation, multiple show cause notices were issued for the period November 2009 to June 2017 alleging liability under "Renting of Immovable Property Service", "Manpower Recruitment or Supply Agency Service" and "Supply of Tangible Goods Service", along with failure to discharge service tax, obtain registration and file returns. The demands, with interest under Section 75 and penalties under Sections 77 and 78, were confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) for the later period. 3. Aggrieved by the impugned Orders 1 & 2, the Appellant has preferred the pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mand under supply of tangible goods. On limitation, it was submitted that the entire demand is barred by limitation, as all material facts were disclosed through a lease agreement and the issue is purely interpretational, with no suppression, fraud or wilful misstatement, and therefore the extended period as well as penalties under Sections 77 and 78 are not invocable. The Appellant accordingly prayed for setting aside the impugned demands along with interest and penalties. 6. The Ld. Authorized Representatives for the Department supported the findings of the adjudicating authority in the first appeal and the Commissioner (Appeals) for the later period, contending that the Appellant had leased not merely agricultural land but also buildings, labour quarters, offices, machinery and other infrastructure, thereby rendering taxable services under "Renting of Immovable Property Service", and that the presence of such assets takes the transaction outside the scope of agricultural exclusion. It was further submitted that the Appellant continued to be the employer of plantation workers and facilitated their deployment to the lessee, thereby rendering "Manpower Recruitment or Supply Agen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vice", "Manpower Recruitment or Supply Agency Service" and "Supply of Tangible Goods Service", on the ground that the lease involved not only land but also buildings, labour, machinery and other facilities. The Appellant, on the other hand, has consistently contended that the entire arrangement is a composite agricultural transaction for plantation activities and cannot be vivisected for the purpose of taxation. 11. On perusal of the lease agreement, we find that the estates were leased specifically for plantation activities including cultivation, application of fertilizers, irrigation, harvesting and processing of green tea leaves. The agreement clearly casts responsibility on the lessee to carry out agricultural operations and bear the associated costs. The lease consideration is directly linked to agricultural output, being computed on the basis of quantity of green leaf harvested and auction price, which clearly establishes that the transaction is in the nature of agricultural revenue sharing rather than commercial renting. 12. It is relevant to note that prior to the introduction of the negative list regime, exemption was granted to services relating to agriculture under....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6] "The expression "in relation to" (so also "pertaining to"), is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context..." [Para 48] We find that the Hon'ble Supreme Court has thus authoritatively held that such expressions "in relation to" used therein is of wide amplitude and are words of comprehensiveness and include both direct and incidental activities having nexus with the principal subject matter. Applying the said principle, it is evident that not only core agricultural operations such as cultivation and harvesting, but also all ancillary and incidental activities connected therewith, would fall within the scope of services in relation to agriculture. Applying the above principle, we find that all elements of the lease arrangement, including provision of land, infrastructure, labour quarters and machinery, are integrally connected with plantation activities and cannot be artificially segregated. The attempt of the Department to vivisect the composite transaction into multiple taxable services is thus contrary....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture for the purpose of taxation. 19. With regard to the allegation of "Manpower Recruitment or Supply Agency Service", we find that the essential ingredients of the service, namely provision of manpower for consideration with control and supervision vesting in the recipient, are not satisfied. The workers were engaged in agricultural operations and were under the control of the lessee. There is no evidence of any separate consideration for supply of manpower. The lease agreement specifically provides that all costs relating to wages, statutory benefits and labour welfare are to be borne by the lessee, which clearly demonstrates that there is no supply of manpower by the Appellant. The agreement further provides that the lessee shall have absolute and unfettered rights over the estate and that even the manager placed by the lessor shall not interfere in day-to-day operations, thereby conclusively establishing that control and supervision of workers rests entirely with the lessee. This position would hold good not only under the negative list regime but also for the period prior to 01.07.2012, as the activity, being in relation to agricultural operations, was not liable to servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as leased out the factory of the borrower to the lessee. As part of the agreement, the lessee has undertaken to continue the services of the persons who were on the muster rolls of the borrower as permanent employees and the lessee was required to pay salaries/wages to the employees directly. Therefore, it cannot be said that the appellant has provided any service by way of manpower supply to the lessee. In any case, the salaries/wages were paid directly to the employees/workers and the appellant has not received any consideration for any services rendered. Therefore, the question of demanding any service tax in the absence of a consideration will not arise at all." 21. We have carefully perused the above decisions and find that the ratio laid down therein squarely applies to the facts of the present case. In both the decisions, the Tribunal has emphasized that where the employees are engaged in the operations of the lessee, the wages are paid directly by the lessee, and no consideration flows to the lessor, the essential ingredient of "service", namely consideration, is absent and the activity cannot be classified as manpower supply service. In the present case also, as borne o....