Brass scrap processing constitutes manufacturing under Section 2(f), not manpower supply service, service tax demand unsustainable

CESTAT Ahmedabad held that appellant was not liable for service tax under Man Power Recruitment and Supply Agency Service category for loading, unloading, sorting, breaking, cutting and casting brass scrap into billets. The tribunal found the activity constituted manufacturing under Section 2(f) of Central Excise Act, 1944, not manpower supply service. Appellant charged per kg of processed material rather than labor wages, indicating job work rather than manpower supply. The demand for service tax was unsustainable and impugned order was set aside. Appeals allowed.

---

---

Issues:
Determining liability for service tax under 'Man Power Recruitment and Supply Agency Service' for job work activities involving loading, unloading, sorting, breaking, cutting, and casting of brass scrap into billets.

Analysis:
The appellant, represented by Shri Amber Kumrawat, argued that the job work activities undertaken by Shri Bhavik Hitesh Shah for Rajhans Metals Private Limited do not qualify as 'Man Power Recruitment and Supply Agency Service.' The appellant's submission highlighted that the job work was based on a per Kg basis of net casted billet, indicating a manufacturing activity rather than a service. Reference was made to specific judgments supporting this argument.

On the contrary, Shri Anand Kumar, appearing for the Revenue, reiterated the findings of the impugned order, emphasizing the classification of the service based on the labor work contract. The contract outlined the terms and conditions, including the supply of raw materials, labor cost per kg of net casted billet, and the responsibilities of the labor contractor regarding recruitment, benefits, and tax deductions.

Upon careful consideration of both sides' submissions and reviewing the labor work contract, the Tribunal analyzed the nature of work, payment terms, and conditions outlined in the contract. The Tribunal concluded that the activities performed by Shri Bhavik Hiteshbhai Shah did not constitute 'Man Power Recruitment and Supply Agency Service' but amounted to manufacturing under the Central Excise Act, 1944. The billing structure based on the total weight of processed material further supported the view that the charges were not for labor wages, leading to the decision that the service tax demand was not sustainable.

Citing the judgments referred to by the appellant's counsel, the Tribunal set aside the impugned order, allowing the appeals. The decision was pronounced in open court on 11.09.2024, emphasizing the clear distinction between job work activities and 'Man Power Recruitment and Supply Agency Service' in this particular case.

---