Job-work exemption denied where agreements were really manpower supply contracts, with service tax liability upheld.

The job-work exemption under Notification No. 25/2012-Service Tax applies only where the contract, read as a whole, genuinely provides for an intermediate production process in relation to goods on which duty is payable by the principal manufacturer. On a holistic reading, the Court found that the agreements primarily regulated deployment, supervision, wage payment, statutory compliance and indemnity, and did not contain the defining features of job work such as process specifications, quality parameters, delivery schedules or breach consequences. The piece-rate billing did not change the substance of the arrangement. The services were therefore treated as contract labour and manpower supply, so the service tax demand was upheld.

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Issues: Whether the services rendered under the agreements with the principal customer were job work falling within the exemption for carrying out an intermediate production process as job work, or were in substance contract labour and manpower supply liable to service tax.

Analysis: The exemption under Notification No. 25/2012-Service Tax applied only where there was an intermediate production process carried out as job work in relation to goods on which appropriate duty was payable by the principal manufacturer. Reading the agreements as a whole, the Court found that they regulated deployment and supervision of personnel rather than a genuine job-work arrangement. The agreements lacked essential features of job work, such as defined process specifications, quality parameters, delivery schedule, and consequences for breach, while repeatedly emphasising recruitment, control, supervision, wage payment, statutory compliance, and indemnity obligations typical of a contract labour arrangement. The piece-rate billing did not alter the real nature of the arrangement, and the cited precedent was treated as fact-specific.

Conclusion: The arrangement was held to be a contract labour and manpower supply contract, not exempt job work, and the demand of service tax was upheld.

Ratio Decidendi: For claiming the job-work exemption, the contract must on a holistic reading genuinely establish an intermediate production process as job work; where the agreement is substantively a labour-supply arrangement and the job-work label is only a camouflage, the exemption is unavailable.

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