Classification of service under Manpower Recruitment & Supply service

PJ/Case Laws/2010-11/1057

Case: M/s Karnataka Personnel Services v/s CCE, Mangalore

Citation: 2011-TIOL-81-CESTAT-BANG

Issue:- Whether providing staff for cleaning under an agreement would fall under the category of ‘manpower recruitment and supply services’?

Brief Facts:- Appellant had entered into agreement with the Manipal Academy of Higher Education and KMC Hospital for cleaning the premises. Revenue contended that as per the agreement, the appellant is providing the staff for house keeping and cleaning based upon the fixed amount of which computed on the basis of basic salary and other components. Show cause notice was issued for the extended period of time after investigation. Appellant contested the demand of service tax on the ground that they are not supplying any manpower but are doing the cleaning activity of the premises as lump sum job and they are paid only 10% as service charges.

It was held by the Lower Authorities that the appellant were providing Manpower Recruitment service and were liable to pay service tax for providing the said service. Demand of duty with interest was confirmed and penalties were also imposed.

Against the impugned order, appellant had filed appeal before the Tribunal and application for stay and waiver of pre-deposit is filed.

Appellant’s Contentions:- Appellant submitted that the agreement entered by the appellant covers two different activities i.e. cleaning services and manpower supply services. The Lower Authorities have confused the proceedings and has encompassed the scope of different services into one and came to the conclusion that the activity is on manpower supply services.

It is submitted that the agreement entered by the appellant is of principal to principal basis and the personnel of the appellant are not deemed to be employees, agents and contract personnel of the Manipal University.

It is submitted that the agreement clearly states out that the personnel deployed by the appellant shall work under the supervision and control of supervisors of the Appellant. Though there is a mention that the appellant would deploy a specific number of personnel as requisitioned by the Manipal University, but the supervision and co-ordination for cleaning Services is left to the appellant i.e. under the control of appellant.

The activity entered to is that of cleaning services. Attention is drawn to the clauses of the agreement.

Respondent’s Contentions:- Revenue submitted that the agreement clearly indicates that the appellants has to be paid as per the wage particulars which comprises specifically of basic wages, variable DA, PF, administration cost, etc. Attention was drawn to the clauses of the agreement particularly the clause that the personnel who are to be appointed shall be interviewed by the Manipal University. It was submitted that any person not found suitable in the said interview was not deployed by the appellant.

Reasoning of Judgment:- The Tribunal perused the clauses of the agreement and observed that reproduced Services and Obligations clause as has been entrusted to the appellant, that the activity of cleaning has been given as lump sum job to the appellant. For this job, the consideration paid is in accordance with agreement as per details in Schedule – I.

On perusal of the Schedule – I, Tribunal found that the amount has been worked out based upon wages of a single person employed by the appellant. It would mean that the appellant would employ a specific number of persons for cleaning activity and consideration payable will be actuals + 10% as an additional amount as service charges.

On perusal of the agreement, Tribunal found that though the Manipal Academy of Higher Education has right to reject a candidate who is deputed by the assessee for cleaning services, the entire obligation and the responsibility of keeping the area clean as per the agreement is left to the appellant/ assessee and their supervisors.

In view of this, prima facie, Tribunal is of the view that the services rendered by the appellant could not fall under the category of ‘manpower recruitment and supply services’.

Tribunal was of the view that the appellants has made out a prima facie case for waiver of pre-deposit of the amounts adjudged by the adjudicating authority. Application for the waiver of pre-deposit of the amounts adjudged by the adjudicating authority. Application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal.

Decision:- Stay application allowed.

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PJ/Case Laws/2010-11/1057

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