Whether transfer of employees to a new joint venture be considered as providing Manpower Recruitment or Supply Agency Services?

PJ/Case Law/2013-14/1843

Case:- BPLLTD V/S COMMISSIONER OF SERVICE TAX, BANGLORE.

Citation: - 2013 (31) S.T.R. 502 (TRI.-BANG.)

Brief Facts: - The Brief facts of this case are that Appellant is seeks waiver and stay in respect of the adjudged dues including an amount of Rs. 48,30,369/- demanded towards Service Tax under the head ‘Manpower Recruitment or Supply Agency for the Period from June to December, 2005. The appellant viz. M/s. BPL ltd. has formed a Joint venture with M/s. Sanyo Electric company Ltd., Japan and this joint-venture is called M/s. Sanyo BPL Pvt. Ltd. Under this arrangement, M/s. BPL Ltd. would ask their employees to resign, who would then join M/s. Sanyo BPL P. Ltd. As some time was taken for the joint-venture to launch its business activities, M/s. BPL ltd. continued to retain the employees and pay their salaries and wages though the employees were sitting idle. This “idle Period” is from June to December, 2005. In order to compensate the loss arising out of this, the Joint-venture paid Rs. 5 Crores to M/s BPL ltd., which was shown as ‘expenditure’ in the Accounts of the joint-venture. The Department framed a case out of this situation. They considered the appellant as a “Manpower recruitment and supply agent” and considered the aforesaid amount of compensation as the consideration for the service of ‘Manpower recruitment or Supply agency Service’. The impugned demand is on this basis. The reported case pertains to the stay application.

Appellant contentions: - The learned counsel has narrated the above facts and pleaded prime facie case for the appellant.

Reasoning of Judgment: - We have heard the learned additional commissioner (AR) also who reiterates the finding of the adjudication authority. After considering the submissions, prima facie we have not found any ingredients of ‘Manpower Recruitment or Supply Agency Service’ in the aforesaid transactions. Hence, there will be waiver of pre-deposit and stay of recovery in respect of the adjudged dues.

Decision:- Stay application allowed.

Comment:-The gist of this case is that mere deputation of present employees to a new joint venture would not tantamount to providing the services of Manpower Supply and Recruitment Services to the new joint venture as primarily the activity of the assessee is not to supply manpower for a consideration. Moreover, the consideration received in this respect pertains to compensation of salary paid to the employees during the idle time.

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PJ/Case Law/2013-14/1843

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