Lump-sum job work contract in factory premises was not manpower supply service, so the tax demand failed

A lump-sum fabrication contract performed within factory premises, involving cutting, punching, drilling, bending and notching on materials supplied by the principal unit, was treated as execution of a job work contract rather than supply of manpower. The description of the recipient as principal employer did not change the true character of the arrangement. On that basis, the activity was held outside the taxable category of manpower supply recruitment agency service, and the service tax demand was unsustainable.

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Issues: Whether the respondent's activity of carrying out fabrication and related work within the factory premises under a lump-sum contract was taxable as manpower supply recruitment agency service.

Analysis: The activity was found to be execution of a job contract within the factory premises, involving operations such as cutting, punching, drilling, bending and notching on material supplied by the principal unit. The arrangement showed payment on a lump-sum basis for work undertaken, not supply of manpower. The existence of a licence describing the recipient as principal employer did not alter the true nature of the contract. The earlier view that such activity falls outside the taxable category was applied, and the reasoning based on Notification No. 8/2005-ST supported the conclusion that the demand was not sustainable.

Conclusion: The activity did not fall under manpower supply recruitment agency services and the service tax demand was unsustainable.

Final Conclusion: The Revenue's challenge failed, and the order dropping the service tax demand was sustained.

Ratio Decidendi: A lump-sum job contract performed within the factory premises, where the contractor executes specified work rather than supplying manpower, is not taxable as manpower supply recruitment agency service.

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