Job contract work inside factory not manpower supply service; service tax demand held unsustainable.

Activities carried out inside the factory on a lump-sum job contract, including cutting, punching, drilling and bending of material supplied by the recipient, were part of the manufacturing process before the RG-1 stage and not manpower recruitment or supply agency service. The contract was treated as execution of work rather than supply of labour, and the recipient's description as principal employer did not change the true nature of the arrangement. The exemption and coverage considered under Notification No. 8/2005-ST also supported non-taxability, and taxing the same value again was viewed as impermissible double taxation. The service tax demand was therefore unsustainable.

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Issues: Whether the respondents' activity of undertaking work inside the factory premises on a lump-sum basis constituted manpower recruitment and supply agency services and attracted service tax.

Analysis: The activity was found to be part of the manufacturing process carried out within the recipient's factory before the RG-1 stage, involving cutting, punching, drilling, bending and similar operations on material supplied by the recipient. The arrangement was treated as execution of a lump-sum job contract rather than supply of manpower directly or indirectly. The licensing description of the recipient as principal employer did not alter the true nature of the contract. The exemption/coverage considered under Notification No. 8/2005-ST also supported the view that the demand was unsustainable, and taxing the same value again was viewed as impermissible double taxation.

Conclusion: The activity did not amount to manpower recruitment or supply agency service, and the demand of service tax was not sustainable.

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