2016 (7) TMI 90 - AT - Service Tax

Classification of service - nature of contract - material handling contract versus manpower, recruitment or supply agency service - Held that - On bare perusal of the work order/work schedule, it is seen that it does not state that particular number of labour/employees should be recruited. The payment is fixed according to the work executed and not according to the number of persons employed. As per the agreement, the respondents are to execute the activities described in work schedule in the premises. The payment is paid as per completion of the work and not according to the labour employed. There is no whisper in the contracts for supply of manpower to Hindustan Zinc Ltd. The entire essence of contract is the execution of work detailed in the work schedules. Therefore, the view of the Commissioner (Appeals) that it is lumpsum work, which would not fall under the category of providing of manpower supply service does not call for any interference. - No demand - decided against the revenue.

Summary

Issues:
Revenue's appeal against Commissioner (Appeals) order setting aside demand, interest, and penalty passed by the original authority.

Analysis:
The case involved a dispute regarding the liability to pay service tax under the category of manpower, recruitment, or supply agency service. The Revenue challenged the order passed by the Commissioner (Appeals) that set aside the demand, interest, and penalty imposed by the original authority. The dispute arose from contracts recovered during search operations with M/s Hindustan Zinc Ltd., where the department viewed the principal activity of the respondent as providing labor, thus subjecting them to service tax. The original authority confirmed the demand, interest, and penalty, leading to the appeal. The Revenue argued that the contracts involved engagement of labor by the respondents, emphasizing the provision of labor for specified work. They contended that the work orders indicated the supply of manpower, supported by conditions specifying labor quality, welfare, insurance, and meals, falling under manpower recruitment and supply agency service.

The respondents, represented by counsel, countered that the contracts were for lumpsum work, not for the supply of manpower. They highlighted that the payment was based on work completed, not on the number of persons employed, and the responsibility for job completion rested with the respondents, not Hindustan Zinc Ltd. The respondents argued that statutory labor conditions applied to all contractors and that the labor did not have an employee-employer relationship with Hindustan Zinc Ltd. The respondents also cited relevant case laws to support their position.

After hearing both sides, the tribunal analyzed the work orders and concluded that the contracts did not specify the recruitment of a particular number of laborers, with payment based on work done, not on the number of employees. The tribunal found that the essence of the contracts was the execution of detailed work schedules, indicating a lumpsum contract for material handling and ancillary works, not for providing manpower supply service. Relying on relevant case laws, the tribunal dismissed the appeal, holding it devoid of merits.

In conclusion, the tribunal upheld the Commissioner (Appeals) decision, emphasizing that the contracts were for lumpsum work, not for the supply of manpower, and therefore, did not fall under the category of providing manpower supply service. The judgments cited in support of this decision further reinforced the tribunal's ruling, leading to the dismissal of the appeal.