2026-VIL-1576-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax – Manpower Recruitment or Supply Agency Service – Applicability to Non-Commercial Organizations – Appellant is a non-commercial, charitable organization registered under the Travancore Cochin Literacy Scientific and Charitable Societies Registration Act, engaged in organizing economically backward women for full employment and providing them with training in various skills. Appellant organizes women members to ensure every family obtains full employment with full employment comprising work security, income security, food security and social security. The women members, who are part of the organization and constitute its workforce, seek direct employment with clients with organizational endorsement to ensure payment of prompt and correct wages to reduce exploitation. The Department raised demand for service tax under the category of manpower recruitment or supply agency service for the period from 01.05.2006 to 31.12.2007. The Commissioner (Appeals) confirmed the demand without considering the factual aspects of the organization and its functioning – Whether the appellant, a non-commercial charitable organization where the organization and workers are not separately identifiable, is engaged in rendering service for supply of manpower within the meaning of Section 65(68) of the Finance Act, 1994 – HELD – The appellant is not engaged in rendering any service in any manner for the supply of manpower. The appellant organizes women to ensure that every family obtains full employment and the organizational structure suggests it is essentially in the nature of a trade union or workers collective where members constitute the organization. The members acquire knowledge through training programmes organized by the organization and thereafter seek employment with clients with organizational endorsement. No intermediaries exist in this case. The definition of manpower recruitment or supply agency service contemplates a situation where a person is engaged in supply of manpower and presumes an employer-employee relationship between the agency and the individual, with individuals being contractually employed by the manpower recruitment or supply agency. In the present case, the workers and the organization are not separately identifiable and no such contractual employment relationship exists between the organization and the workers. The organization does not supply manpower but rather facilitates direct employment of collective workers. The fact that the appellant is not a commercial concern further distinguishes it from the category of manpower supply agencies. For the period prior to 01.05.2006, the definition of manpower recruitment or supply agency explicitly required the service provider to be a commercial concern, and the appellant does not qualify as such. Even if the activities were to be considered within the scope of manpower supply services, the considerable portion of the amount collected was reimbursed as wages to members and the balance charged as registration and training fees was negligible and did not fall within the monetary limit of taxable service – The adoption of the gross amount without deducting reimbursable wages is unsustainable – The appeal is allowed
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