Laying Up of Cables alongside Roads Does Not Amount to ‘Manpower, Recruitment or Supply Agency Services’: CESTAT [Read Order]

In a recent case, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that laying up of cables alongside roads does not amount to ‘Manpower, Recruitment or Supply Agency Services’. During the audit of accounts of Sivaraman S, the appellant by the internal audit, it was noted that the appellant is providing manpower supply to M/s. Bharat Sanchar Nigam Limited (hereinafter referred to as M/s. BSNL) and received consideration for providing services. On scrutiny of the work orders issued by BSNL, it appeared that the appellant is responsible for providing labour at the required destination to assist M/s. BSNL staff for attending cable faults and other related works on agreed rates. It appeared to the department that the said service falls under the category of ‘Manpower, Recruitment or Supply Agency Services’. The financial accounts of the appellant revealed that the appellant has received an amount of Rs.1,51,73,250/- towards the above activity of supply of manpower to M/s. BSNL and had accounted the same under the head ‘civil contract receipts’ in their financial statements for the period 2007-2008. The appellant had not registered under the category of ‘Manpower, Recruitment or Supply Agency Service’ and had not discharged appropriate service tax under this category A Show Cause Notice was issued proposing to demand service tax for the said period 2007-2008 and 2009-2010 along with interest and for imposing a penalty. After due process of law, the original authority confirmed the demand, interest and imposed penalty. It was submitted that the appellants have registered under the category of “Erection, commissioning and Installation service” and the same has been wrongly classified by the lower authorities under the “Manpower recruitment or supply of agency service”. The contract entered into between the appellants and the BSNL will prove that the appellants do not only supply manpower assistance the wording of the contract is worded as assisting the BSNL Staff. The work undertaken by the appellants relates to the laying of the cables and the related works, in the course of the works assistance is also been given, both manually as well as through automation. However, the essential work undertaken by the appellants will be classified under the category of Erection, Commissioning and Installation service only. The department alleged that the appellant has provided labour to assist BSNL staff in attending to cable faults and other related works and that the said activity would fall under the category of Manpower Recruitment or Supply Agency Service. On perusal of the tender document, it is seen that the work undertaken by the appellant is like cable laying work alongside the road. It does not involve Manpower Recruitment or Supply Agency Services to M/s. BSNL. It was found that the appellant is not required to supply manpower and is also not paid based on the number of persons engaged in the work. Instead, the consideration is fixed based on the work executed. In other words, the consideration is paid on a rate basis which includes the work of laying cable. The appellant is providing the work of making trenches and also laying the cable work. Such work is done as per the direction of the BSNL staff and the appellant is not providing any labour to assist the BSNL staff. A two-member bench of Sulekha Beevi C S, Member (Judicial) and Vasa Seshagiri Rao, Member (Technical) observed that the appellant is undertaking work of trenching and laying cable for the areas allotted to them. There is no supply of labour by the appellant as the wages to the labourers are paid by the appellant. The amount received from BSNL is for trenching and laying of cable alongside the road. The Board vide Circular No. 123/5/2010 – TRU dated 24.06.2010 has clarified that the laying of cables under or alongside roads is not a taxable service. After appreciating the facts and based on the Board’s Circular the Tribunal found that the appellant has not provided ‘Manpower, Recruitment or Supply Agency Services’. The demand raised therefore cannot be sustained. The Tribunal while allowing the appeal set aside the order M.N. Bharathi appeared for the Appellant and M.Ambe Authorised Representative appeared for the Respondent. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Laying Up of Cables alongside Roads Does Not Amount to ‘Manpower, Recruitment or Supply Agency Services’: CESTAT [Read Order]

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Laying Up of Cables alongside Roads Does Not Amount to ‘Manpower, Recruitment or Supply Agency Services’: CESTAT [Read Order]

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