True character of contract controls service tax; packing work through contractor was not manpower supply.

A contract for packing loose cement at the plant was not treated as Manpower Recruitment and Supply Agency Service merely because payment was on a piece-rate basis and labour was engaged to perform the work. The true character of the arrangement was a packing activity undertaken by the contractor, not a supply of manpower; the deployment of workers for that purpose did not change the nature of the contract. Relying on the relevant Board circular and consistent tribunal decisions, the service was held outside the manpower supply category, and the service tax demand was therefore unsustainable.

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Issues: Whether the services of packing loose cement undertaken through a contractor amounted to Manpower Recruitment and Supply Agency Service so as to attract service tax under reverse charge.

Analysis: The contractual arrangement was for packing work at the appellant's plant, and the payment structure by piece rate did not, by itself, convert the arrangement into supply of manpower. The contractor was obliged to carry out the packing activity, and the engagement of labour for performance of that work did not alter the essential nature of the contract. Reliance was placed on the applicable Board circular and consistent tribunal decisions, which recognized that where the contract is for manufacturing or an allied process, the mere presence of labour deployment does not make it a manpower supply service.

Conclusion: The service was not taxable as Manpower Recruitment and Supply Agency Service and the demand was not sustainable.

Ratio Decidendi: The true character of the contract governs service tax liability, and a contract for packing or allied manufacturing activity does not become manpower supply merely because payment is linked to quantity or labour is used for performance.

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