2026 (1) TMI 653 - AT - Service Tax

Contractor's washing, stacking, cleaning and bottling-area tasks held specified work contract, not manpower-supply; penalty quashed

Dominant issue: whether the contractor's activity constitutes 'Manpower Recruitment or Supply Agency Service' or a contract for specified work. Reasoning: ... Classification of services - Manpower Recruitment or Supply Agency Services, or not - Appellants are providing certain ‘quality works’ in the manufacturing unit of M/s Bagga Distilleries Hyderabad Pvt Ltd., who are engaged in the manufacture alcoholic beverages (IML) - HELD THAT:- The activity agreed under the contract is for providing ‘quality work’, i.e., washing activities, stacking in godowns, cleaning of washing area, bottling area, blending area, godowns and surroundings using the manpower of the contractor, employed by the appellant himself and not for supply of manpower as such to M/s Bagga Distilleries Hyderabad Pvt Ltd. As per the contract, the appellants will be paid based on the work carried out by the contractor and not on the basis of number of persons employed for the work, which is a clear indication that the activity under the contract is not for ‘supply of manpower’ at all. It is also important that the manpower works under the control and supervision of the appellants and not under the control of supervision of M/s Bagga Distilleries Hyderabad Pvt Ltd. Therefore, the contract clearly shows that there is no supply of manpower, and it is for providing certain specified works as mentioned in the contract. Hence, demand based on classification of the services provided by the appellants as supply of manpower service would not sustainable as per law. The Co-ordinate Bench, Bangalore in the case of S.S. Associates Vs Commissioner of Central Excise [2009 (12) TMI 152 - CESTAT, BANGALORE], wherein, it is also held that 'the entire tenor of the agreement and the purchase orders issued by the appellants’ service recipient clearly indicates the execution of a lump-sum work. In our opinion this lump-sum work would not fall under the category of providing of service of supply of manpower temporarily or otherwise either directly or indirectly.' In the case of Sivashakti Enterprises Vs Commissioner of Central Excise, Pune, [2015 (12) TMI 682 - CESTAT MUMBAI], decided by Tribunal Mumbai, it is also important to mention wherein, appellant had deploying his employees in the factory premises of Tata Motors for doing of specific job work in accordance with the purchase order placed and the manufacture paying consideration to appellant based upon the number of pieces that would be manufactured. Hon’ble Tribunal held that the lump sum work not covered under ‘Manpower Recruitment or Supply Agency Service’ and held not taxable. The demand under ‘Manpower Recruitment or Supply Agency Service’ is not sustainable. Further, since the demand is not sustainable on merit itself, the imposition of penalty will also not sustain. Thus, in view of the same, the impugned orders are liable to be set aside. Appeal allowed. Issues: (i) Whether the services rendered by the appellants are classifiable as 'Manpower Recruitment or Supply Agency' services under the Finance Act, 1994.Analysis: The statutory definition requires provision of services for recruitment or supply of manpower, directly or indirectly. The contract documents show engagement for specified 'quality work' (unloading, washing, stacking, cleaning, bottling-related activities) performed using contractor's own manpower; payment is linked to work performed rather than number of persons supplied; and the contractor supervises and controls the workforce. Precedent establishes that the tenor of the agreement, the nature of consideration (lump-sum or payment by output), and the control/supervision of personnel determine whether an agreement amounts to supply of manpower. Where the contract evidences execution of a lump-sum work and not supply of personnel to the recipient, such services do not fall under the manpower recruitment or supply agency category. The impugned demand was therefore examined on merits in light of the contract terms and relevant authorities.Conclusion: The services are not classifiable as 'Manpower Recruitment or Supply Agency' services; the demand and related penalties are unsustainable and are set aside; the appeals are allowed with consequential relief, if any.Ratio Decidendi: Where a contract evidences execution of specified lump-sum work, payment based on work output, and contractor control over personnel, the contract does not constitute supply of manpower and does not attract liability as a manpower recruitment or supply agency service.