Textile processing activities under job work contract not classified as Manpower Recruitment Service

CESTAT Ahmedabad held that appellant's textile processing activities under job work contract did not constitute Manpower Recruitment or Supply Agency Service. The contract involved warping, weaving, mending, knitting, packaging, texturizing, twisting, reeling, coning, rebinding and packing activities with payment fixed per metre basis regardless of manpower deployed. Appellant fulfilled conditions under Board Circular 190/2015. Additionally, appellant's transportation activities with consignment notes/LR did not qualify as supply of tangible goods for use service. Service tax demand on both counts was unsustainable. Appeal allowed, impugned order set aside.

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Issues involved:
The issues involved in the judgment are whether the appellant is liable for service tax under the Manpower and Recruitment Service for textile processing activities and under the Supply of Tangible Goods for Use Service for providing transportation services.

Textile Processing Activities:
The appellant was engaged in textile processing activities under a lump sum contract for a specific period. The department claimed that the appellant should be liable for service tax under the Manpower and Recruitment Service due to accounting service charges under labor charges. However, the appellant argued that the activity falls under a job work contract based on piece rate charges, not under Manpower and Recruitment Services. The tribunal found that the nature of the job work contract indicated that the appellant's activity did not classify as Manpower supply or recruitment service, as clarified by a relevant board circular.

Transportation Services:
Regarding the demand for service tax on the hiring of trucks under the Supply of Tangible Goods for Use Service, the appellant provided transportation services and charged freight for the same. The appellant contended that they acted as transporters of goods, not as suppliers of tangible goods for use. The tribunal examined the consignment notes issued by the appellant and concluded that the activity did not classify as the supply of tangible goods for use. The tribunal referred to various judgments to support this finding.

Conclusion:
After considering the submissions from both sides and examining the records, the tribunal found that the demand for service tax on both counts was not sustainable. The tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, in accordance with the law. The judgment was pronounced in the open court on a specific date.

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