Contract for service, not manpower supply, can qualify for agricultural service tax exemption and refund where statutory conditions are met.

Where a contract leaves supervision, disciplinary control, wage liability, statutory compliance and employment responsibility with the contractor, the arrangement is treated as a contract for service rather than manpower supply. Applying the control, organisation and multifactor tests, the activity was classified as business auxiliary service, not manpower supply service. Because the work involved processing unmanufactured tobacco, it fell within agricultural produce, so the service met the exemption conditions under the pre-negative list notification and the corresponding post-negative list treatment for services in relation to agriculture. The refund claim was therefore accepted and rejection of refund was not sustainable.

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Issues: Whether the activity undertaken under the contract was manpower supply service or a job-work service in relation to agricultural produce, and whether the appellant was entitled to exemption and refund for the pre-negative list and post-negative list periods.

Analysis: The agreement and annexure showed that the workmen remained under the contractor's supervision, disciplinary control, wage liability, statutory compliance and employment responsibility. The arrangement was expressly described as one to carry out identified jobs and not as supply of manpower. Applying the control test, organisation test and multifactor test, the relationship was held to be a contract for service and not a contract of service. The service was therefore classified as business auxiliary service and not manpower supply service. The activity related to processing of unmanufactured tobacco, which fell within the scope of agricultural produce. On that basis, the service satisfied the exemption conditions under the pre-negative list notification and the corresponding post-negative list exemption and negative list treatment for services in relation to agriculture.

Conclusion: The appellant was entitled to the exemption and refund claim, and the rejection of refund could not be sustained.

Final Conclusion: The impugned order was set aside and the appellant was granted the resulting relief.

Ratio Decidendi: Where the contract reserves supervision, discipline, wage responsibility and statutory obligations to the contractor, the arrangement is a contract for service, and processing of agricultural produce under such a contract may qualify for service tax exemption when the statutory conditions are otherwise met.

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