Piece-rate job work is not manpower supply when the contractor uses its own labour and delivers output-based services.

Work performed on a piece-rate or lump-sum job-work basis, where the contractor deploys its own workers, pays their wages and complies with labour laws, is not manpower recruitment or supply agency service. The activity was treated as output-based contract work for wheel assembly rather than supply of personnel, and earlier Tribunal decisions supported that characterisation. It was also noted that the activity would fall within the exemption under Notification No. 8/2005-ST dated 01.03.2005 if viewed as taxable. Accordingly, service tax demand under manpower recruitment or supply agency services was held unsustainable.

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Issues: Whether work undertaken on a piece-rate basis in the client's factory, with the appellant engaging its own manpower, was liable to service tax as manpower recruitment or supply agency services.

Analysis: The work order showed that the appellant was engaged to perform wheel assembly for a fixed amount per unit and was required to deploy its own workers, pay their wages, and comply with labour laws. The activity was therefore a contract for output-based job work on a lump-sum / piece-rate basis and not a contract for supply of manpower. The same view had been taken in earlier decisions relied upon by the Tribunal. The activity was also noted as falling within the exemption under Notification No. 8/2005-ST dated 01.03.2005, if treated as taxable.

Conclusion: The demand of service tax under manpower recruitment or supply agency services was not sustainable and the appeal succeeded.

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