Transportation contract not treated as manpower supply; tax demand set aside, but penalty upheld for registration and return defaults.

A transportation contract for tractors on a per-kilometre, job-specific basis was not taxable as Manpower Recruitment or Supply Agency Services because the contractor undertook delivery responsibilities and related compliances, and the recipient sought delivery of tractors rather than deployment of personnel. The service tax demand was therefore set aside. However, failure to obtain registration and file service tax returns was treated as an independent breach attracting penalty under the service tax law, so the penalty was upheld notwithstanding the annulment of the tax demand.

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Issues: (i) Whether transportation of tractors by road under the contract fell within the scope of Manpower Recruitment or Supply Agency Services; (ii) Whether penalty was leviable for failure to obtain registration and file returns.

Issue (i): Whether transportation of tractors by road under the contract fell within the scope of Manpower Recruitment or Supply Agency Services.

Analysis: The contract was found to be for transportation of tractors on a per-kilometre basis, with the contractor undertaking delivery responsibilities, statutory compliances en route, and other job-related obligations. The arrangement was held to be job-specific and not manpower-specific. The mere organisation of drivers for execution of the transportation work did not make the activity one of supply of manpower, and the service recipient was concerned with delivery of tractors rather than the number of persons deployed.

Conclusion: The demand of service tax under Manpower Recruitment or Supply Agency Services was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether penalty was leviable for failure to obtain registration and file returns.

Analysis: Even though the substantive tax demand was set aside, the assessees were found to have not obtained registration or filed returns for the activity undertaken. That omission was treated as a violation attracting penal consequences under the service tax law, independent of the fate of the tax demand.

Conclusion: Penalty was upheld and imposed against the assessees.

Final Conclusion: The tax demand was annulled, but the penalty component survived, resulting in partial relief to the assessees.

Ratio Decidendi: A transportation contract governed by a per-kilometre, job-oriented arrangement does not become taxable as manpower supply merely because drivers are deployed to perform the work, but non-compliance with registration and return obligations can still attract penalty.

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