Job work, not manpower supply, governs service tax treatment where contracts show lump-sum industrial processing on recipient-supplied material.

Where contracts and billing showed lump-sum job work for specific processes such as cutting, drilling, punching, bending and notching, and the recipient supplied the material while the work was performed in its factory, the activity was not treated as supply of manpower for service tax purposes. The tribunal found that the department's attempt to classify the arrangement as manpower recruitment or supply agency service was unsustainable because the substance of the transaction was industrial job work, not labour supply. The prior decision on an identical activity supported the same classification. The service tax demand was therefore not maintainable and the revenue challenge failed.

---

---

Issues: Whether the activity undertaken by the respondents amounted to supply of manpower liable to service tax under the category of manpower recruitment or supply agency service, or was only job work carried out on lump-sum basis.

Analysis: The billing pattern showed payment for lump-sum job work depending upon the quantum of material and the work orders were for specific work such as cutting, drilling, punching, bending and notching. The material was supplied by the recipient, the work was carried out within its factory premises, and the recipient was already discharging central excise duty on the goods. On these facts, the inference that the respondents were merely supplying labour was not sustained. The earlier decision covering an identical activity supported the same view.

Conclusion: The activity was not manpower supply service; the classification made by the department was unsustainable and the respondents were entitled to relief.

Final Conclusion: The orders setting aside the service tax demand were upheld and the revenue appeals failed.

Ratio Decidendi: Where the contract and billing establish specific job work on a lump-sum basis, with material supplied by the recipient and work executed as an industrial process, the activity is not to be treated as supply of manpower for service tax purposes.

---