Job-contract services not manpower supply under section 65(105); service tax demand set aside, appeal allowed

CESTAT, Bangalore held that the services provided by the appellant were not classifiable as "manpower recruitment or supply agency" under section 65(105). On examining the contracts and invoices, the Tribunal found that the essence of the arrangement was execution of specific jobs for a lump-sum consideration, not the supply of individual manpower to the service recipient. The Board's Master Circular on supply of manpower was held inapplicable because there was no agreement for utilization of individual workers' services by the client. Consequently, the impugned order demanding service tax under manpower recruitment or supply agency services was set aside, and the appeal was allowed with consequential relief.

---

---

Issues: (i) Whether the services rendered by the appellant under the work orders for loading, unloading, bagging, stacking, weighing and allied activities are classifiable as services of a "manpower recruitment or supply agency" liable to service tax?

Analysis: The statutory definition requires provision of any service for recruitment or supply of manpower, i.e., an agreement for use of individuals' services by a client where the individuals remain contractually employed by the supplier. The work orders and invoices show a lump-sum contract for execution of specified godown handling operations with rates fixed per activity, obligations to complete works, and no agreement for providing or placing particular individuals at the client. The cited Board circulars and Master Circular address cases of temporary supply of manpower where the agency supplies individuals contractually employed by it for use by the recipient; those clarifications apply where the essence is supply of personnel and an employer-employee relation exists between agency and individuals. Applying the principle that a document must be read as a whole and the tenor of the agreement governs its character, the contracts here reflect execution of work rather than supply of manpower; thus the circulars on supply of manpower do not transform a lump-sum works contract into a manpower-supply service.

Conclusion: The services rendered by the appellant are not classifiable as "manpower recruitment or supply agency" services; the appellant's appeal is allowed.

Ratio Decidendi: A lump-sum contract for execution of specified work, construed from the tenor of the agreement, does not constitute supply of manpower and therefore does not fall within the definition of "manpower recruitment or supply agency" for service tax purposes under the Finance Act, 1994.

---