Trust supplying sugarcane to sugar factories through hired contractors/farmers under contract for harvesting and transportation of sugarcane with sugar factories cannot be regarded as providing Man power Recruitment/supply service

57  [2014]52 taxmann.com 388 (Mumbai-CES-TAT) Bhogavati Janseva Trust vs CCE,Kolhapur.

Trust supplying  sugarcane to sugar  factories through hired contractors/farmers under contract for harvesting and transportation of sugarcane with sugar factories cannot be regarded as providing Man power Recruitment/supply service.

FACTS:

In this case,the Tribunal disposed of six appeals the issue involved being common. The appellant entered into an agreement with thefactories for harvesting and transportation of sugarcane from the farmer’s field to the sugar factory. The farmers also entered into an agreement with sugar factories for the sale of the same. The appellants angaged contractors for harvesting of sugarcane and transportation thereof by trucks, tractors, head loaders etc. on transportation charges , sugar  factories discharged the service tax and therefore the issue in the present case is confined only to the taxability of harvesting charges paid to the appellants .The appellant in turn distributed  these charges to the contractors.  In some cases besides harvesting charges, certain commission by way of supervision/administration charges was also paid to the appellant. The department contended that the entire consideration received by the appellant was   for providing supply of manpower services to the sugar factories.

HELD:

The tribunal held that the appellants are not manpower recruitment  agencies as they do not recruit any persons, they also do not supply manpower to the sugar factory. What they have undertaken is harvesting of sugarcane and transportation of the same to the sugar factory. To undertake the work, they have entered into agreements with the contractors who have provided them manpower. In  any service activity,manpower is required . This will not make the service supply of manpower.Further,the consideration paid is not on the supply of manpower but on sugarcane supplied on tonnage basis. If an efficient contractor engages less manpower,he will make more profit, while an inefficient contractor engaging more manpower would make less profit. The essential nature of service is harvesting and supply of sugarcane. The Tribunal also held that such activity merits classification under the category of “ business auxiliary service ‘’. Accordingly, demand under the category of “manpower supply service’’ was set aside