TaxTMI 
TaxTMI 
2026 (3) TMI 435
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....and Rent-a-Cab Service. During audit of the appellant's ECC Workshop accounts for the periods July 2012 to March 2014 and April 2014 to March 2015, it was observed that the appellant had engaged various contractors to carry out operations within its factory premises pursuant to work orders under which all materials, power, and machinery were supplied by the appellant, and the work was executed under its supervision and control, with consideration paid on a per-piece or per-MT basis. The department classified these activities as Manpower Recruitment and Supply Service, attracting liability to pay 75% of the service tax under the partial reverse charge mechanism (RCM), in terms of notification 30/2012 ST, dated: 20.06.2012. For the period July 2012 to March 2014, the service tax payable on labour charges was computed and it was found that tax was only partly paid in respect of certain work orders issued to M/s. C. Mani Construction and M/s. J. Manickam, resulting in a short-payment. A further demand was raised for the period April 2014 to March 2015. In respect of L&T (TLTRS Division), a Show Cause Notice dated 08.08.2014 demanded duty for the period July 2012 to March 2014, followed....
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....e appellant. Mere execution of work at the appellants' premises using their raw materials and tools does not constitute manpower supply, as clarified by Board Circular No. 190/9/2015-ST. For identical contracts, the service tax demand on one contractor was set aside by Order-in-Appeal No. 64/2018 dated 08.03.2018, which has attained finality. Once the activity is held non-taxable in the hands of the service provider, the corresponding RCM demand on the recipient is unsustainable. The Ld. Counsel stated that the issue stands conclusively settled by a catena of decisions holding that contracts for execution of specific jobs with payment on piece-rate/output basis do not constitute manpower supply services, including: i. Suresh Contracts & Ors. - 2023 (5) TMI 393 (CESTAT Chennai), following Adiraj Manpower Services (SC); ii. Donypolo Udyog Ltd. - 2023 (3) TMI 539 (CESTAT New Delhi); iii. Nishkarsh Industrial Services - CESTAT Ahmedabad; iv. Rajhans Metals Pvt. Ltd. - 2024 (9) TMI 929 (CESTAT Ahmedabad); v. Abbas Mussa Hasam & Ors. - 2024 (5) TMI 135 (CESTAT Ahmedabad); vi. Fire Controls - 2019 (8) TMI 1028 (CESTAT Bangalore). He....
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....tract of service from a contract for service. [Sushilaben Indravadan Gandhi Vs New India Assurance Co. Ltd., (2021) 7 SCC 151] 6. Recently the Hon'ble Supreme Court in GENERAL MANAGER, U.P. COOPERATIVE BANK LTD. Vs ACHCHEY LAL & ANR. [2025 INSC 1175/Civil Appeal No.2974/2016, Dated: 11.09.2025], examined a catena of judgments so as to consolidate and lay down the relevant tests to determine the employer-employee relationship. It held: "FEW TESTS TO DETERMINE EMPLOYER EMPLOYEE RELATIONSHIP TO BE KEPT IN MIND WHILE DECIDING MATTERS ARISING FROM LEGISLATIONS LIKE INDUSTRIAL DISPUTES ACT, 1947, THE FACTORIES ACT, 1948 ETC: 1. Control Test (i) The control test postulates that when the hirer has control over the work assigned and the manner in which it is to be done, an employer-employee relationship is established. The control test is derived from common law application in vicarious liability claims. (ii) The earliest instance of applying the control test in India is in Shivanandan Sharma Vs Punjab National Bank Ltd. reported in AIR 1955 SC 404. Here, a claim under the Industrial Disputes Act arose as to whether a head cashier was the bank's employ....
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....and eligible for benefits under the Industrial Disputes Act 1947. (v) The court enunciates the manner to make this distinction as under: "The correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer" (emphasis added) (vi) Thus, the control test was expanded to mean due control and supervision. In numerous cases, the control test adopted in Dharangadhara (supra) remained the sole factor determining employer-employee relationship. The degree and level of control required would depend on the facts and circumstances of each case. 2. Organisation/Integration Test (i) The first instance of the shift from the control test as a sole determinative factor was in Silver Jubilee Tailoring House Vs Chief Inspector of Shops and Establishments reported in (1974) 3 SCC 498. This Court observed that the earlier reliance on the control test was attributed to the agrarian economy, where masters often exercised control over workers. This occurred due to masters having more knowledge, skill and experience. The shift to a multifactor. test is due ....
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....considered as a question of law. Such a determination must be adjudicated based on the evidence adduced in the court by either party and not merely by referring to the provisions. The relevance of factors other than the control and integration to determine whether the workers are employees or independent contractors was brought out. The court examined the following factors: a) who is the appointing authority? b) who is the paymaster? c) who can dismiss? d) the duration of an "alternative service"; e) the extent of control and supervision; f) the nature of the job, e.g. whether it is professional or skilled work; g) nature of establishment; h) the right to reject. (iv) This Court in Bengal Nagpur Cotton Mills v. Bharat Lal reported in (2011) 1 SCC 635 laid down two factors to be considered to determine the true nature of the hiring entity, i.e., whether it is the principal employer or contractor: (i) Whether the principal employer pays the salary instead of the contractor; and (ii) Whether the principal employer controls and supervises the work of the employee? 4. Refinement o....
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.... examined. The nature of manpower supply service is quite distinct from the service of job work. The essential characteristics of manpower supply service are that the supplier provides manpower which is at the disposal and temporarily under effective control of the service recipient during the period of contract. Service providers accountability is only to the extent and quality of manpower. Deployment of manpower normally rests with the service recipient. The value of service has a direct correlation to manpower deployed, i.e., manpower deployed multiplied by the rate. In other words, manpower supplier will charge for supply of manpower even if manpower remains idle. 2.1 On the other hand, the essential characteristics of job work service are that service provider is assigned a job e.g. fabrication/stitching, labelling etc. of garments in case of apparel. Service provider is accountable for the job he undertakes. It is for the service provider to decide how he deploys and uses his manpower. Service recipient is concerned only as regard the job work. In other words service receiver is not concerned about the manpower. The value of service is function of quantum of job work....
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....asons: A. The consideration is based on quantum of work completed in the factory of L&T. B. There is no restriction on the number of workers to be employed by the contractor for carrying out the work. C. The work force employed is on the roll of the contractor and under the supervision of the contractor as the contractor has to ensure that the workmen strictly follow the safety procedure. 9. As evident from the First Appellate Authority's order, no master- servant relationship exists between the appellant and the workers. The work is executed entirely by the contractor, who is paid based on the work completed. This arrangement satisfies the essential characteristics of job work service under Board's Circular No. 190/9/2015-ST, which is binding on the department. Further, in light of the Hon'ble Supreme Court's judgment in Achchey Lal (supra), the relationship fails the 'control test', as the workmen are on the contractor's rolls and under his supervision. The degree of control rests predominantly with the contractor, and the workmen are neither integrated into nor directly remunerated by the appellant's organization. Given the straightforward nature of....