Job work treated as manufacture, excluding manpower recruitment and business auxiliary service tax, with exemption applied.

Job work converting aluminium ingots into aluminium castings on a production-linked basis was treated as manufacturing, not manpower recruitment, because the arrangement depended on quantum of output rather than supply of labour. As manufacturing activity, it was outside business auxiliary services and also fell within the exemption notification relied on. The service tax demand therefore could not be sustained, and the impugned order was set aside.

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Issues: Whether conversion of aluminium ingots into aluminium castings on job work basis amounted to manpower recruitment services or a manufacturing activity, and whether such activity could be taxed under business auxiliary services or was exempt under the relevant notification.

Analysis: The activity was found to be job work undertaken on the basis of quantum of production, not on the basis of supply of labourers or wages linked to manpower. The work carried out in the client's factory was treated as production on behalf of the client and therefore as manufacture. An activity amounting to manufacture does not fall within manpower recruitment services, and manufacturing activity is excluded from business auxiliary services. The activity was also held to be covered by the exemption notification relied upon.

Conclusion: The demand could not be sustained. The impugned order was set aside and the appeal was allowed.

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