Shriram Oos Tod Majoor Seva Sangh vs Commissioner Of Central Excise, ...

(Arising out of Order-in-Original No. 09/ST/COMMR/2009 dated 25/03/2009 passed by the Commissioner of Customs, Central Excise & Service Tax, Aurangabad )

For approval and signature:

Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical)

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1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : of the Order?

4. Whether Order is to be circulated to the Departmental : authorities?

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Shriram Oos Tod Majoor Seva Sangh : Appellant

VS

Commissioner of Central Excise, Customs & Service Tax, Aurangabad. : Respondent

Appearance

Shri S.B. Awate, Consultant for Appellant

Shri B.S. Meena, Additional Commissioner (A.R) for respondent

CORAM:

Mr. Anil Choudhary, Member (Judicial) Mr. P.S. Pruthi, Member (Technical)

Date of hearing : 01/01/2015 Date of decision : 01/01/2015

ORDER NO.

Per : Anil Choudhary

The appeal is directed against Order-in-Original No: 09/ST/COMMR/2009 dated 25/03/2009 passed by the Commissioner of Central Excise, Customs & Service Tax, Aurangabad

2. The appellant, M/s. Shriram Oos Tod Majoor Seva Sangh, Shrigonda, Ahmednagar District, is a private limited company whose share holders are mainly farmers. They entered into an agreement with M/s. Kukadi SSK Ltd., for harvesting of sugar cane at the fields of member-farmers and transporting the same to Kukadi SSK Ltd.s, Shrigonda, Ahmednagar District. Remuneration for harvesting and transportation was paid on a tonnage basis i.e., per tone of the sugar cane delivered at the factory. The department was of the view that the act of providing harvesting sugar cane and transporting the harvested sugar cane from the farmers fields to the factory site is classifiable as manpower recruitment or supply agency service and is chargeable to service tax. Accordingly, a show cause notice dated 13/5/2008 was issued to the appellant demanding service tax amounting to `Rs.93,65,050/- under the provisions of Section 73 of the Finance Act, 1994 along with interest thereon under Section 75 ibid. The notice also proposed to impose penalties under Sections 77 and 78 of the said Finance Act. The notice was adjudicated vide the impugned order and the demands were confirmed along with interest thereon. An equivalent amount of penalty was also imposed under Section 78 apart from a penalty of Rs.5,000/- under Section 77. Hence the appellant is before us.

3. The learned counsel for the appellant made the following submissions:

3.1. The individual farmers entered into agreements with the sugar factory for sale of sugar cane before the commencement of sugar cultivation and the factory pays advance to the farmers for meeting the expenses for growing the sugar cane, harvesting and transporting the same. As per the agreement, it is the farmers responsibility to harvest and deliver sugar cane from the field to the sugar factory;

3.2. It is difficult for each individual farmer to make arrangement for harvesting and transporting the sugar cane up to the sugar factory. The farmers along with others formed societies under the Cooperative Societies Act.

3.3. The appellant is a private limited company, whose shareholders are mainly farmers and the appellant is engaged in facilitating harvesting of sugar cane from the fields and further transport of the harvested sugar cane from the fields to the sugar factory. For that purpose, the appellant avails services of various contractors who supply labour for harvesting and for transportation. The appellant-company is coordinating between the sugar factory and the labour contractors, for which they receive consideration from the sugar factory towards supervision charges and they discharge service tax liability thereon under the head Business Auxiliary Service. For supply or transportation by means of truck/tractors, etc., the sugar factory pays freight and service tax thereon, whereas for harvesting of sugar cane, the appellant pays to the contractor harvesting charges which they get reimbursed from the sugar factory at actuals. The activity undertaken by the appellant is harvesting of sugar cane and transporting the same on behalf of the farmers. Thus, the said activity does not come under the category of manpower recruitment or supply agency service as defined in Section 65(105)(k) of the Finance Act, 1994 read with Section 65(68). The charges for the harvesting and transportation are paid on tonnage basis and not on the number of labour employed. The sugar cane being a standing crop is covered under the Sale of goods Act, 1930 and in view of the agreements between the farmers and the sugar factory, it is transfer of property in goods to the sugar factory by the farmer and the transaction is one of sale. The activity of harvesting and transportation is incidental to sale.

3.4. It is also contended that out of the total period, from 5.11.2005 to 4.6.2007, covered by show cause notice dated 13/05/2008 is barred by limitation, in the absence of any suppression or conscious withholding of any information.

3.5. In a similar case pertaining to Shriram Krishi Audyogik Ous Todani, the Commissioner of Central Excise (Appeals) vide order-in-appeal No. PII/PAP/67/2010 dated 21/04/2010 held that labour contractor is the service provider and the farmer is the recipient of service and no service tax is payable on the amounts paid to the labour contractor under the category of Manpower Recruitment or Supply Agency Service. Similarly, in order-in-appeal dated 18/06/2010 relating to Sampatrao Deshmukh Oos Utpadak And Todani Sahakari Sanstha, the Commissioner of Central Excise (Appeals) held that since the appellant is paid by the sugar factory on tonnage basis, of the sugar cane delivered, irrespective of the number of labour employed and number of vehicles used for transportation; therefore the service rendered cannot be classified under the category of Manpower Recruitment or Supply Agency service and had accordingly dropped the demand. The appellant also relies on Final Order No. A/532/13/CSTB/C-I dated 02.04.2013, wherein under similar circumstances the co-ordinate bench of this Tribunal (of which, I was also a member) have held in favour of assessee that there is no element of Manpower Recruitment or Supply Agency Service. In view of the above, it is pleaded that the demand of service tax under the category of manpower recruitment or supply agency service is not sustainable.

3.6. The learned counsel has also submitted copies of bills raised by them on the sugar factory from which it is evident that the charges have been made on per ton basis of the sugar cane delivered and the sugar factory has also paid them service charges on tonnage basis of sugar cane delivered and not on any other parameters. From these documents it is evident that the appellant has not rendered any service relating to Manpower Recruitment or Supply Agency service. 3.7. In the light of the above he pleads for allowing the appeal.

4. The leaned Addl. Commissioner (AR) appearing for the Revenue submits that in terms of the agreement entered into by the appellant with the sugar factory, it includes cutting work done through labourers. The agreement with the sugar factory clearly states that our company will provide labour for sugar cane cutting including labour carrying sugar cane on head, i.e., dolly center or doycee center, along with all necessary equipments to cut the sugar cane of the members and non-members of the karkhana within the operating limit of the karkhana and from outside the operating limit of the karkhana and transporting it to the karkhanas site. From this clause it is evident that the transaction is one of supply of labour for undertaking sugar cane harvesting and transport of the same by head load from the farmers fields to the sugar factory and, therefore, even if the charges are paid on tonnage basis, it is in respect of supply of labour that the charges have been paid. Accordingly, he submits that the impugned order classifying the services rendered under the category of manpower recruitment or supply agency service is sustainable in law and he accordingly pleads for dismissing the appeal.

5. We have carefully considered the submissions made by both the sides. We have also perused the agreements entered into between various parties which are available on record.

5.1. From the agreement entered into between the farmer and the sugar factory, the farmer has undertaken to supply sugar cane grown by him in his field to the sugar factory. The agreement also says that the farmer will cut the sugar cane by his own labour and will deliver it at the gate of the sugar factory through his own transport means Arrangement for hiring and transportation will be made by the farmer. The labour required for this work of cutting and transportation will be of the farmer and the responsibility of paying wages to them would also be of the farmer. As per the agreement entered into between the appellant and the labour contractor the agreement is for cutting and transporting of sugar cane through labourers from producer-members, supplying sugar cane to the factory. The agreement also provides that the bill of work of cutting/transporting sugar cane done by the labour contractor has to be taken for the sugar cane producer (farmer) and be paid to the labour contractor as per rates fixed by the appellant. In addition to the above, there is another agreements between the appellant and the sugar factory.

The agreement is for sugar cane cutting and transportation. As per the said agreement, it is the sugar factorys responsibility to make available all equipments, tractors, trucks, bullock carts and cutting labourers and the appellants responsibility is to cut the sugar cane of their members and non-members within and outside the area of operation and deliver the same at the factory gate. The responsibility of payment of wages to be given to the sugar cane cutting labourers and drivers after proper discharge of the work of transportation of sugar cane through trucks/tractors and bullock carts shall be on the sugar factory. The appellants responsibility is of assisting in the programme of cutting and inspection for which the appellant receives supervision charges. The rates for sugar cane cutting and transportation are fixed on tonnage basis and rates are fixed independently for various activities such as (i) tying bundle by cutting and slicing sugar cane and (ii) sugar cane transportation by various modes such as bullock-carts, trucks/tractor, labourers (head loads). From these agreements what is evident is that there is no supply of any labour by the appellant to the sugar factory.

They are only facilitators between the farmers and the sugar factory. Their work is to ensure that the sugar cane ripe for harvesting are cut and transported to the sugar factory. The labour for the same is provided either by the sugar factory itself or by the labour contractors. The charges involved in sugar cane harvesting is collected by the appellant and distributed to the labour contractors/labourers. The charges for transportation of sugar cane are directly paid by the sugar factory to the transporters wherever the transport is done by trucks/tractors. Only when the transport is by the head load, the payment is made through the appellant to the labourers. In all these transactions, the payment is on tonnage basis of the sugar cane delivered at the factory site and not on the basis of number of persons employed.

5.2. As per the provisions of Section 65(68) Manpower Recruitment or Supply Agency service means any person providing any service, directly or indirectly, in any manner, for the recruitment or supply of manpower, temporarily or otherwise to any person and as per Section 65(105)(k) taxable service means any service provided or to be provided 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.

5.3. From the above definition it is clear that the service brought under the tax net under the Manpower Recruitment or Supply Agency Service envisages supply of labour per se. In the instant case, we notice that there is no supply of labour per se to the sugar factory. The work undertaken is harvesting of sugar cane and transporting the same to the sugar factory for which labour is employed. The sugar cane belongs to the sugar factory in terms of the agreement of sale executed between the farmer and the sugar factory. Therefore, the activity undertaken by the appellant is one of procuring or processing of the goods belonging to the client which is classifiable under Business Auxiliary Service and not under Manpower Recruitment of Supply Agency Service. On the supervision charges paid to the appellant for the said activity, they have already discharged service tax liability under Business Auxiliary service.

6. In view of the above, we do not find any merit in the impugned order classifying the service under the category of Manpower Recruitment or Supply Agency service. Accordingly we set aside the impugned order and allow the appeal with consequential relief, if any.

(Pronounced & Dictated in court)

(P. S. Pruthi) Member (Technical)

(Anil Choudhary) Member (Judicial)

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