2023 (9) TMI 19 - AT - Service Tax

Tribunal rules on service classification: Fabrication jobs deemed Business Auxiliary service

The tribunal ruled in favor of the appellant, determining that their activity of carrying out fabrication jobs for a service recipient did not classify as ... Classification of services - Manpower Recruitment or Supply Agency Service or otherwise? - appellant's activity of carrying out job of fabrication for their service recipient with the help of the labour of the appellant - HELD THAT:- It is clear that the appellant had been assigned the job of fabrication by the service recipient and the appellant have charged on the quantum of job basis and not on the basis of number of manpower or man hours. Therefore, irrespective of number of manpower or man hours involved in the job to be carried out, the appellant is under obligation to complete a job of fabrication as assigned to him, therefore, in this arrangement it cannot be said that the appellant have provided the service of Manpower Recruitment or Supply Agency Service. As per the arrangement between the appellant and service recipient as evident from the documents the service of the appellant does not fall under the category of Manpower Recruitment or Supply Agency Service however, the same is classifiable under ‘Business Auxiliary service’ under the sub category of ‘production or processing on behalf of the client. Since demand was not raised under ‘Business Auxiliary service’ hence, the demand will not sustain for this reason alone. The impugned order is not sustainable, hence, the same is set aside. Appeal is allowed. Issues involved: The classification of the appellant's activity as either Manpower Recruitment or Supply Agency Service or another category.Summary:The issue in this case was whether the appellant's activity of carrying out fabrication jobs for their service recipient using their own labor would be classified under Manpower Recruitment or Supply Agency Service. The appellant argued that they did not provide manpower but undertook fabrication jobs based on weight or per piece, supported by invoices and a letter from the service recipient. The Revenue contended that the service fell under Manpower Recruitment or Supply Agency Service due to mentioning labor charges in some invoices.After considering both sides' submissions and examining the documents, the tribunal found that the appellant did not provide manpower to the service recipient. The appellant was assigned fabrication jobs without the service recipient controlling or supervising the manpower. The appellant charged based on the job quantum, not the number of manpower or man-hours, indicating the service did not fall under Manpower Recruitment or Supply Agency Service. The tribunal held that the service was classifiable under 'Business Auxiliary service' for 'production or processing on behalf of the client,' which was not the basis of the demand. The appellant's argument that their activity was exempted under Notification No. 08/2005-ST due to the service recipient paying excise duty on the final product was also accepted. The judgments cited by the appellant supported their case.Consequently, the tribunal set aside the impugned order as unsustainable and allowed the appeal.