Spirax Marshall P. Ltd vs Commissioner Of Central Excise, Pune I

(Arising out Order-in-Original No. PI/Commr/ST/23&24/ 2011 dated 30.08.2011 passed by the Commissioner of Central Excise, Pune I)

Appeal No. ST/593/12 - Mum

(Arising out Order-in-Appeal No. PI/RKS/121-122/2012 dated 23.05.2012 passed by the Commissioner of Central Excise(A), Pune I)

For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

1. Whether Press Reporters may be allowed to see No 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 Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

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

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

Spirax Marshall P. Ltd. Forbes Marshall P. Ltd. J.N. Marshall P. Ltd. Appellant

Vs.

Commissioner of Central Excise, Pune I Respondent

Appearance:

None for the appellant None for the respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of hearing : 15-09-2015 Date of decision : 15-09-2015

O R D E R No:..

Per: M.V. Ravindran:

All these three appeals are directed against Order-in-Original No. PI/Commr/ST/23&24/ 2011 dated 30.08.2011 and Order-in-Appeal No. PI/RKS/121-122/2012 dated 23.05.2012.

2. Heard both sides and perused the record.

3. The issue involved in this case being the same and in respect of the same group companies we dispose of all the appeals by a common order.

4. The relevant facts that arise for consideration are during the period June 2005 to March 2010 all the three appellants had charged their group companies some amount as a consideration for deputing their employees to attend to work of the group companies. The lower authorities were of the view that such service would fall under the category of Manpower Recruitment Service or Supply Agency Service. Coming to such a conclusion, show-cause notices were issued for the demand of the service tax, interest thereof and for imposition of penalties. The contests to the show-cause notices were rejected and the service tax liability was confirmed along with interest and penalties. The confirmation of the service tax liability is under the category of Manpower Recruitment Service or Supply Agency Service.

5. The main contention of the ld. CA is that the issue is now squarely covered by the judgment of the Hon'ble High Court of Gujarat in Arvind Mills Ltd. 2014 (35) STR 496 (Guj) and that in identical issue in one of their group companies matter in the case of Krohne Marshall Pvt. Ltd., this Tribunal vide order no. A/2503/15 dated 22.07.2015 has allowed the appeals filed by the assessee.

6. After considering the submissions made by both sides and perused the record, we do find the issue involved is regarding the demand of service tax under the category of Manpower Recruitment Service or Supply Agency Service. We find that the identical issue has been decided by this very bench in vide order no. A/2503/15 dated 22.07.2015 in respect of the group companies of the very same appellant.

6. We have considered the submissions made at length by both the sides and perused the records. The undisputed fact is that the appellant is one of the group companies of Forbes Marshall. It is also undisputed that there is an arrangement of deputing the employees of the appellant to various group companies. The various group companies, where the employees are deputed, make salary payment to the appellant on actual basis is also undisputed. Based upon such factual matrix, we find that the claim of the Revenue as to the said activity of deputing employees to various group companies would fall under the category of Manpower Recruitment and Supply Agency Services is incorrect. The very identical issue was before the Honble High Court of Gujarat in the case of Arvind Mills Ltd. (supra). The Honble High Court, after considering all the submissions, held that such deputation of employees would not amount to manpower recruitment and supply agency services. We reproduce the entire judgment below:

1. Revenue is in appeal against the judgment of the Customs Excise & Service Tax Appellate Tribunal ("the Tribunal" for short) dated 26.7.2013 raising following questions for our consideration:-

"(a) Whether in the fact and the circumstances of the case the Hon'ble CESTAT has erred in applying the ratio of a case decided by CESTAT Delhi in case of Aramount communication Ltd. reported in 2013-TIOL-37-CESTAT-DEL.: 2013 (29) STR 317 without narrating and applying the same to the facts of the present case?

(b) Whether in the facts and the circumstances the activity of the Respondent is covered under the definition of Manpower Recruitment Agency as contemplated in C168 of S.65 of the Finance Act 1994 R/w. C1 105 (k), thus the respondent is liable for the Service Tax?

(c) Whether in the facts and circumstances of the case whether the service rendered by the respondent is a taxable activity attracting Service Tax?"

2. Issue in brief is whether the respondent is a Manpower Supply Recruitment Agency. Definition of the said term applicable at the relevant time reads as under:-

"Manpower recruitment or supply agency means any commercial concern engaged in providing any service directly or indirectly, in any manner for recruitment or supply of manpower, temporary or otherwise to a client".

3. Brief facts are that respondent had a composite textile mill and was engaged in manufacturing of fabrics and ready-made garments. In order to reduce its cost the respondent deputed some of its employees to its group company, who were also engaged in similar businesses. Reason for such deputation was also on certain occasions stipulated work arising for a limited period. The Tribunal recorded that there was no allegation of finding that the respondent had deputed employees to any other concerns outside its own subsidiary companies. The Tribunal also recorded that undisputedly the employees deputed do not work exclusively under the direction or supervision of the subsidiary company and upon completion of the work they were repatriated to the respondent company. On such basis, the Tribunal held that the respondent cannot be said to be Manpower Supply Recruitment Agency and, therefore, not exigible to service tax.

4. Counsel for the Revenue vehemently contended that the definition of Manpower Supply Recruitment Agency is very wide and would include range of activities of supply of manpower either temporarily or permanently. He submitted that sizable manpower was required for the respondent from the group companies for deputation of the staff. He drew our attention to the amendment of such definition to contend that after the amendment, the definition was widened.

5. It is true that in the present form, the definition of Manpower Supply Recruitment Agency is wide and would cover within its sweep range of activities provided therein. However, in the present case, such definition would not cover the activity of the respondent as rightly held by the Tribunal. To recall, the respondent in order to reduce his cost of manufacturing, deputed some of its staff to its subsidiaries or group companies for stipulated work or limited period. All throughout the control and supervision remained with the respondent. As pointed out by the respondent, company is not in the business of providing recruitment or supply of manpower. Actual cost incurred by the company in terms of salary, remuneration and perquisites is only reimbursed by the group companies. There is no element of profit or finance benefit. The subsidiary companies cannot be said to be their clients. Deputation of the employees was only for and in the interest of the company. There was no relation of agency and client. It was pointed out that the employee deputed did not exclusively work under the direction of supervision or control of subsidiary company. All throughout he would be under the continuous control and direction of the company.

6. We have to examine the definition of Manpower Supply Recruitment Agency in background of such undisputable facts. The definition though provides that Manpower Recruitment Supply Agency means any commercial concern engaged in providing any services directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client, in the present case, the respondent cannot be said to be a commercial concern engaged in providing such specified services to a client. It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied. In the present case, facts are to the contrary.

7. In the result, no question of law arises. Tax Appeal is dismissed.

Since the issue of Manpower Recruitment and Supply Agency Services is now squarely settled in identical set of facts, we hold that the impugned order to that extent is incorrect and needs to be set aside and we do so.

7. It can be seen that now the issue is settled in favour of the appellant. Accordingly, we find that the impugned orders before us are unsustainable and liable to be set aside and we do so. The impugned orders are set aside. Appeals are allowed with consequential relief, if any.

(Operative part pronounced in Court)

(C.J. Mathew) (M.V. Ravindran) Member (Technical) Member (Judicial)

//SR

8 ST/660, 661/11