The Contract Labour (Regulation and Abolition) Act, 1970 – Service Tax –Appellant obtained service tax registration under the category of ‘Manpower Recruitment or Supply Agency Service’ – Appellant entered into an agreement with a company ‘S’ and was required to provide personnel for manufacturing activitiesCommissioner of Central Excise, Pune issued show cause notice to appellant demanding service tax – Allegations were that appellant had failed to assess and discharge service tax liability regarding supply of manpower to company ‘S’, suppressed the facts and made a misrepresentation by filling incorrect ST-returns – The adjudicating authority held that appellant habitually delayed paying service tax and that supply of labour by appellant to ‘S’ on piecemeal basis did not alter the characteristic of manpower services provided – Order was challenged in appeal before Tribunal – Tribunal held that service provided by appellant to ‘S’ was not in nature of job work service liable to be exempted, but in the nature of contract labour – On appeal, held: Issue is whether the apellant is job worker or is merely a supplier of contract labour for the work of the establishment – The fact that the appellant is not a job worker is evident from a conspicuous absence in the agreement of crucial contractual terms which would have been found had it been a true contract – On reading the agreement as a whole, it is apparent that the contract is pure and simple a contract for the provision of contract labour – An attempt has been made to camouflage the contract as a contract for job work to avail of the exemption from the payment of service tax – Judgment of Tribunal does not suffer from any error of reasoning.
CENTRAL EXCISE PUNE II
Dismissing the appeal, the Court
HELD:1.1. The substratum of the agreement between the appellant and company ‘S’ deals with the regulation of the manpower which is supplied by the appellant in his capacity as a contractor. The fact that the appellant is not a job worker is evident from a conspicuous absence in the agreement of crucial contractual terms which would have been found had it been a true contract for the provision of job work in terms of Para 30(c) of the exemption notification. There is a complete absence in the agreement of any reference to: (i) the nature of the process of work which has to be carried out by the appellant; (ii) provisions for maintaining (a) the quality of work; (b) the nature of the facilities utilised; or (c) the infrastructure deployed to generate the work;
(iii) the delivery schedule; (iv) specifications in regard to the work to be performed; and (v) consequences which ensue in the event of a breach of the contractual obligation. [Para 16][1161-D-G]
1.2. The decisions of CESTAT relied upon by the appellant also do not help their submissions as they are fact-specific and based on a reading of the contracts in those cases. In this case, though ostensibly, the agreement contains a provision for payment on the basis of the rates mentioned in Schedule II, the agreement has to be read as a composite whole. On reading the agreement as a whole, it is apparent that the contract is pure and simple a contract for the provision of contract labour. An attempt has been made to camouflage the contract as a contract for job work to avail of the exemption from the payment of service tax. The judgment of the Tribunal does not, in the circumstances, suffer from any error of reasoning. [Para 17][1161-G-H; 1162-A-B] Om Enterprises v. Commissioner of Central Excise, Pune-I 2018 (17) G.S.T.L. 260 ; Bhagyashree
Enterprises v. Commissioner 2017 (3) G.S.T.L.515; Dhanashree Enterprises v. Commissioner 2017 (5) G.S.T.L. 7 2019 SCC OnLine; S. Balasubramani v. Commissioner 2019 SCC OnLine CESTAT 480referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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