Decided on January 01,2015

Shriram Oos Tod Majoor Seva Sangh Appellant
C.C.E., C. And S.T. Respondents


ANIL CHOUDHARY - (1.)THE appeal is directed against Order -in -Original No. 09/S.T./COMMR/2009, dated 25 -3 -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 shareholders 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 ton of the sugarcane 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. The learned Counsel for the appellant made the following submissions:
2.1 The individual farmers entered into agreements with the sugar factory for sale of sugarcane before the commencement of sugar cultivation and the factory pays advance to the farmers for meeting the expenses for growing the sugarcane, harvesting and transporting the same. As per the agreement, it is the farmers responsibility to harvest and deliver sugarcane from the field to the sugar factory;

2.2 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.

2.3 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 sugarcane 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 sugarcane, 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.

2.4 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 -5 -2008 is barred by limitation, in the absence of any suppression or conscious withholding of any information.

2.5 In a similar case pertaining to Shriram Krishi Audyogik Oos Todani, the Commissioner of Central Excise (Appeals) vide Order -in -Appeal No. PII/PAP/67/2010, dated 21 -4 -2010 : 2010 (19) S.T.R. 303 (COMM. APPL.) 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 -6 -2010 relating to Sampatrao Deshmnkh 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 sugarcane 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 2 -4 -2013 : 2014 (36) S.T.R. 360 (T), 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.

2.6 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.'

2.7 In the light of the above he pleads for allowing the appeal.

(3.)THE learned 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 karkhana's 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.

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