Job-work inside factory is not manpower supply when it forms part of manufacturing and is charged on a lump sum basis.

A lump sum job-work arrangement for cutting, drilling, punching, bending and notching carried out inside the recipient's factory as part of the manufacturing process was treated as execution of work, not supply of manpower. The activity occurred before the goods reached the RG-1 stage, and its cost formed part of the recipient's production cost on which central excise duty was paid. The description of the recipient as principal employer did not change the contractual substance. The service tax demand under Manpower Recruitment or Supply Agency Services was therefore unsustainable, and the assessee's relief was upheld.

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Issues: Whether the activity of cutting, drilling, punching, bending and notching undertaken in the factory premises under a lump sum job-work arrangement constituted taxable Manpower Recruitment or Supply Agency Services.

Analysis: The activity was carried out as part of the manufacturing process in the recipient's factory premises, before the goods reached the RG-1 stage, and the cost was included in the recipient's production cost on which central excise duty was paid. The arrangement was found to be for execution of work on a lump sum basis and not for supply of manpower, and the earlier Tribunal view on identical facts was applied. The reference to the principal employer licence did not alter the real nature of the contract.

Conclusion: The service tax demand under Manpower Recruitment or Supply Agency Services was not sustainable, and the order in favour of the assessee was upheld.

Final Conclusion: The appeal failed because the disputed activity was held to be job work forming part of manufacturing, not taxable manpower supply.

Ratio Decidendi: A lump sum job-work activity performed as an integral part of manufacturing inside the recipient's factory premises does not amount to supply of manpower merely because the recipient is described as the principal employer.

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