Job work linked to production output is not manpower supply for service tax purposes.

Conversion of aluminium ingots into specified aluminium articles on a per-piece, output-linked basis was treated as job work amounting to manufacture, not as supply of manpower. The invoices and purchase orders showed engagement to produce finished articles in the client's factory with own manpower, and the records did not evidence any independent manpower supply business or payment based on headcount or wages. On that footing, the activity fell outside Manpower Recruitment or Supply Agency services, making the service tax demand and penalties unsustainable.

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Issues: Whether the activity of converting aluminium ingots into aluminium articles in the client's factory with own manpower, and payment linked to output per piece, amounted to supply of manpower taxable as Manpower Recruitment or Supply Agency services.

Analysis: The invoices and purchase orders showed that the appellant was engaged to manufacture specified aluminium articles and was paid on a per-piece basis for output, not for supplying labour on the basis of headcount or wages. The records did not show any independent business of manpower supply. The activity was therefore treated as job work resulting in manufacture, and not as provision of manpower services. The reasoning was reinforced by the earlier identical decision relied upon, which held that such production-linked work in the client's factory does not fall within manpower recruitment or supply.

Conclusion: The activity was not taxable as Manpower Recruitment or Supply Agency services and the finding of service tax liability was rejected in favour of the assessee.

Final Conclusion: The demand and penalties based on manpower supply classification were unsustainable, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the dominant obligation is to carry out job work amounting to manufacture and remuneration is linked to production output rather than manpower supplied, the activity is not taxable as manpower recruitment or supply of service.

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