Retrospective road-service exemption and work-oriented contract analysis defeated service tax demands on composite labour arrangements.

A retrospective statutory exemption covered management, maintenance or repair of roads for the specified past period, so service tax demand on road-related services could not survive. The contract for handling, loading, unloading, haulage, cartage and clearing was found to be a composite work-oriented arrangement, with payment linked to work performed rather than headcount, so it was not taxable as manpower recruitment or supply agency service. The commentary notes that only the unchallenged works contract liability remained, while the other demands were deleted, giving partial relief to the assessee.

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Issues: (i) Whether management, maintenance or repair services relating to roads were exempt from service tax for the relevant period under the retrospective special provision; (ii) Whether the activities of handling, loading, unloading, haulage, cartage and clearing work under the contract were liable to service tax as manpower recruitment or supply agency service.

Issue (i): Whether management, maintenance or repair services relating to roads were exempt from service tax for the relevant period under the retrospective special provision.

Analysis: A special statutory provision was inserted granting exemption from levy or collection of service tax on management, maintenance or repair of roads for the specified past period. The disputed period fell within that covered window, so the demand based on road-related services could not survive.

Conclusion: The demand under management, maintenance or repair service was set aside in favour of the assessee.

Issue (ii): Whether the activities of handling, loading, unloading, haulage, cartage and clearing work under the contract were liable to service tax as manpower recruitment or supply agency service.

Analysis: The contract required performance of integrated work for the bottling plant, compliance with labour-law conditions, and payment linked to the quantum of work rather than the number of workers deployed. On that factual matrix, the activity was not a mere supply of manpower but a composite work-oriented arrangement, and the characterization as manpower recruitment or supply agency service was not sustainable.

Conclusion: The demand under manpower recruitment or supply agency service was set aside in favour of the assessee.

Final Conclusion: The demand was sustained only to the extent of the unchallenged works contract liability, and the remaining demands were deleted, resulting in partial relief to the assessee.

Ratio Decidendi: A work-oriented contract cannot be taxed as manpower supply merely because labour is deployed to perform it, and a retrospective statutory exemption governs road-related services for the covered period.

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