Summary
A manpower contractor claimed exemption for intermediate production job work, relying on piece-rate billing and retained supervision of its personnel. Reading the agreements as a whole, the Court held that they concerned supply and regulation of contract labour rather than a specified production job. Important terms identifying the process, quality, output and delivery obligations were absent. Piece-rate payment did not change that substance. The appeal against the service-tax demand, interest and penalty was dismissed.
Issues
- Whether the agreements were for exempt intermediate production job work or supply of manpower.
- Whether piece-rate remuneration and labour-law obligations determined that classification.
Provisions considered
- Entry 30(c), Notification No.25/2012-Service Tax dated 20 June 2012The exemption required an intermediate production process as job work relating to goods on which appropriate duty was payable by the principal manufacturer; this labour-supply arrangement did not qualify. (¶¶ 11, 15-18)
Held
- Entry 30(c) required an intermediate production process, undertaken as job work, in relation to goods attracting appropriate duty payable by the principal manufacturer. Merely using a job-work description did not establish those elements. (¶¶ 11, 16-17)
- The agreements chiefly regulated personnel, their recruitment, service conditions, discipline and statutory dues. They lacked crucial job-work terms specifying the process, quality and facilities, delivery schedule, work specifications and consequences for breach of those production obligations. (¶ 12-16)
- The contract had to be read as a composite whole. Payment at the schedule’s rates did not convert its substantive labour-supply obligations into job work; the other Tribunal decisions relied on by the appellant were fact-specific readings of different contracts. (¶ 17)
- The Tribunal committed no error in rejecting the claimed exemption. The appeal was dismissed, leaving the adjudicated demand, interest and penalty undisturbed. (¶¶ 6-7, 17-18)
Result
Appeal dismissed; Tribunal’s denial of the job-work exemption upheld.