Job work versus manpower supply turns on contractor control, quantity-linked payment, and responsibility for execution.

A contractor undertaking specified fabrication work on a quantity-linked basis, with payment tied to the quantum or tonnage of work executed, was treated as performing job work rather than supplying manpower. The contractor retained responsibility for execution, the workmen remained on its rolls, and supervision and labour deployment rested predominantly with the contractor. Mere use of the principal's premises, materials, power or machinery did not convert the arrangement into manpower supply. The arrangement also matched the departmental circular's description of job work, where the recipient is concerned with the completed result rather than manpower deployment. On that basis, the demand was unsustainable.

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Issues: Whether the activity undertaken by the contractors for the principal amounted to supply of manpower service or was a job work / contractual arrangement on a principal-to-principal basis.

Analysis: The contracts were for specified fabrication activities and the consideration was linked to the quantum or tonnage of work executed, not to the number of workmen or time deployed. The work orders, which were the best evidence of the nature of the arrangement, were not relied upon in the show cause notices. Mere use of the principal's premises, materials, power or machinery did not convert the arrangement into manpower supply. The decisive factors were that the contractor retained responsibility for execution of the work, the workmen remained on the contractor's rolls, and supervision and deployment of labour rested predominantly with the contractor. The arrangement also answered the characteristics of job work recognised in the departmental circular, which states that service recipient concern is with the job result and not with manpower deployment.

Conclusion: The activity was not manpower supply service and the demands were unsustainable; the issue is decided in favour of the assessee.

Ratio Decidendi: Where a contractor undertakes specified work on a quantity-linked basis, retains control over labour deployment and supervision, and the recipient is concerned only with the completed job, the arrangement is a contract for job work and not manpower supply.

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