Manpower supply classification fails where contracts show work-based billing and no suppression supports extended limitation.
Contracts and invoices showed that payment was linked to work executed on a quantity or piece-rate basis, not to the number of workers deployed, so the activity was not classifiable as manpower supply for the period before 31.03.2010. The principal's deposit of ESI and provident fund contributions did not, by itself, prove manpower supply because those statutory obligations could be discharged by the principal employer. As the record did not show suppression, falsification, or a colourable device, the extended period of limitation was also unavailable. The demand, interest, and penalties were therefore unsustainable.
Issues: (i) Whether the appellant was liable to service tax under the category of supply of manpower for the period prior to 31.03.2010; (ii) Whether invocation of the extended period of limitation was sustainable.
Issue (i): Whether the appellant was liable to service tax under the category of supply of manpower for the period prior to 31.03.2010.
Analysis: The contractual documents and invoices showed that payment was linked to the quantum of work executed, not to the number of workers deployed. The work was undertaken as specified jobs for the principal, and the billing pattern supported execution of work on piece-rate or quantity basis. The reliance placed on deposit of ESI and provident fund contributions by the principal did not, by itself, establish that the appellant was supplying manpower, since the principal employer's obligations under the Employees' Provident Fund Act, 1952 and the Employees' State Insurance Act, 1948 could be discharged by the principal. The record did not justify treating the agreements as colourable devices to disguise manpower supply.
Conclusion: The appellant was not liable to be classified as a manpower supply agency for the period in dispute.
Issue (ii): Whether invocation of the extended period of limitation was sustainable.
Analysis: The demand was based on the same work pattern reflected in the agreements and bills, and there was no material to establish contumacious conduct, suppression of facts, or falsification of records. The fact that tax was later paid under compulsion could not, by itself, fasten liability for the earlier period. As the foundational allegation itself was not substantiated, the extended limitation period could not be invoked.
Conclusion: Invocation of the extended period of limitation was not sustainable.
Final Conclusion: The demand, interest, and penalties could not be sustained, and the assessee was entitled to consequential relief in law.
Ratio Decidendi: Where contracts and invoices show payment for execution of work on a quantity basis, and the record does not establish suppression or a colourable device, the activity cannot be treated as manpower supply, and the extended period of limitation is unavailable.
TaxTMI 
AI Drafter ✕
TaxTMI 
