Independent job work on a piece-rate basis is not manpower supply service when the contractor controls execution and quality.

An activity will not constitute Manpower Recruitment or Supply Agency Service where the agreement shows independent execution of specified work on a piece-rate basis, with responsibility for quality and defects resting on the contractor and contractual privity limited to the principal. Mere deployment of workers to perform the contracted job, or compliance with labour law requirements at the factory premises, does not by itself establish supply of manpower. On the facts, the departmental case lacked evidence that the contract was a sham or that payments were made for manpower supplied, so the service tax demand, interest and penalties were set aside.

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Issues: Whether the appellants' activity amounted to Manpower Recruitment or Supply Agency Service, or whether it was only job work executed as independent contractors on piece-rate basis.

Analysis: The agreement showed that the appellants were entrusted with execution of specified manufacturing-related work for TAFE, were responsible for the quality and defects in the work, and had privity of contract only with TAFE. The payment pattern was on piece-rate basis and not on the basis of man-hours or number of persons supplied. Mere engagement of workers for executing the contracted work, or compliance with labour law requirements for work carried on within the factory premises, did not by itself establish supply of manpower. The departmental case was not supported by evidence to show that the agreement was not acted upon or that payments were in fact for manpower supplied.

Conclusion: The activity did not fall under Manpower Recruitment or Supply Agency Service, and the service tax demand, interest, and penalties could not be sustained. The impugned orders were set aside and the appeals were allowed.

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