2026 (3) TMI 1639 - AT - Service Tax

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 ... Classification of service as job work or manpower supply - Principal-to-principal contractual arrangement Job work - Supply of manpower - Control and supervision test - Principal-to-principal contract - The activities undertaken by the appellants for L&T were job work contracts on a principal-to-principal basis and not taxable supply of manpower. - HELD THAT: - The Tribunal held that the show cause notices had neither extracted nor relied upon the relevant work orders, which were the best evidence of the true nature of the arrangement. On the contractual terms produced, the appellants were engaged for specified fabrication activities, and consideration was linked to the quantity or tonnage of work executed, not to the number of workers supplied or the time spent. Mere execution of work at the principal's premises with the principal's materials, power or machinery did not convert the arrangement into supply of manpower. The determinative factor was who retained responsibility for execution of the work and deployment of labour, and that responsibility remained with the appellants. The Tribunal also followed its earlier decision in M/s. Larsen & Toubro Ltd. Vs Commissioner of GST & Central Excise [2026 (3) TMI 435 - CESTAT CHENNAI] on an identical work order and noted that, in similar cases involving the second appellant and another contractor, the Revenue had accepted orders treating the activity as job work. In the absence of distinguishing facts, the Revenue could not take a contrary stand in the present appeals. [Paras 5, 6, 7] The demand treating the activity as manpower supply was unsustainable, and the impugned orders were liable to be set aside. Final Conclusion: The Tribunal allowed the appeals and set aside the impugned orders. It held that the appellants had undertaken contractual fabrication job work and had not rendered taxable manpower supply service. 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.