Work contracts with per kg payment basis don't qualify as Manpower Recruitment or Supply Agency services

CESTAT Ahmedabad held that services provided by appellants under work contracts with payment based on per kg of goods manufactured do not constitute Manpower Recruitment or Supply Agency services. The tribunal distinguished between execution of specific work versus providing manpower, ruling that agreements for particular work execution cannot be classified under Manpower Supply Agency service category. Following precedent in Shri Dayanand Mishra case, the tribunal set aside the impugned orders and allowed the appeal, determining the matter was no longer res integra.

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Issues Involved:
1. Classification of services provided by the appellants.
2. Applicability of Service Tax under the category of Manpower Recruitment or Supply Agency service.

Summary:

Issue 1: Classification of Services Provided by the Appellants

The appellants, engaged by principal manufacturers M/s. Senor Metals and M/s. Rajhansh Metals, undertook activities such as loading, unloading, breaking, cutting, casting, processing, and packing of brass scrap and rods. The appellants employed their own skilled and unskilled laborers, maintaining records and complying with statutory requirements. The department contended that the appellants provided manpower recruitment or supply services under the guise of executing work orders, thus avoiding Service Tax.

The Tribunal found that the issue had already been decided in similar cases, such as M/s. Dayanand Mishra Vs. Commissioner of Central Excise and Service Tax, Rajkot, where it was held that the agreements were for executing specific work and not for providing manpower. The payment was based on the quantum of work performed, not on manpower supplied. Therefore, the activities were classifiable under Business Auxiliary Service, specifically "production and processing of goods for, or on behalf of the client," which is exempt from Service Tax.

Issue 2: Applicability of Service Tax under Manpower Recruitment or Supply Agency Service

The Tribunal reiterated that the matter was no longer res integra, citing previous decisions where it was established that the agreements were for job work and not for manpower supply. The appellants' activities did not fall under the service category of Manpower Recruitment or Supply Agency Service. The Tribunal referenced multiple cases, including Roopsinh Jodhsinh Chauhan and Navalsinh Jadeja vs. CCE & ST, Rajkot, and Sureel Enterprises Pvt. Limited vs. CCE & ST, Ahmedabad, where it was consistently held that such job work agreements do not attract Service Tax under the said category.

The Tribunal concluded that the impugned orders were not sustainable and set them aside, allowing the appeals with consequential relief as per law.

(Order pronounced in the open court on 30.04.2024)

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