2018 (8) TMI 1015 - AT - Service Tax

Classification of services - Job-work - M/s. Molex Mafatlal Micron Pvt. Limited would provide raw materials to the appellant and the the job work would be done by them - Case of the department is that since the entire control is of M/s. Molex Mafatlal Micron Pvt. Limited as regards the job work done by the appellant, the activity of appellant is confined to supply of man power and service tax is demanded under the category of Manpower Recruitment and Supply Agency service. Held that - The appellant has carried out the job work of manufacturing on behalf of the principal under job work arrangements and the payment was also made on the basis of production and not on the basis of number of employees deputed by the appellant. The employees of the appellant were not deputed to the factory of the principal. With these facts, it is held that there is no recruitment or supply of manpower to the principal by the appellant. The job work carried out by the appellant cannot be treated as supply of manpower and hence, the same is not taxable under the head Manpower Recruitment and Supply Agency Service - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of job work agreement for electronic connectors and cable harness; Classification of service under Manpower Recruitment and Supply Agency service; Control and responsibility over employees; Taxability of job work as supply of manpower.

Analysis:
The case involved a dispute regarding the classification of services provided by the appellant under a job work agreement with M/s. Molex Mafatlal Micron Pvt. Limited for manufacturing electronic connectors and cable harness. The department contended that the appellant's activity was akin to supplying manpower, thus attracting service tax under the category of Manpower Recruitment and Supply Agency service.

The appellant argued that they were engaged in manufacturing goods using their own employees and not merely supplying manpower. The charges were based on job work and not on the number of employees provided. The appellant cited several judgments to support their case, emphasizing the nature of the agreement and the actual work performed.

The Assistant Commissioner for the Revenue maintained that the appellant's responsibilities towards employees indicated control by M/s. Molex Mafatlal Micron Pvt. Limited, leading to the conclusion that the appellant was providing manpower recruitment or supply agency service.

Upon careful consideration of the arguments and perusal of the record, the Tribunal found that the appellant's employees were engaged in manufacturing on behalf of the principal under job work arrangements. Payment was linked to production, not the number of employees. The Tribunal emphasized that the appellant did not supply manpower to the principal and distinguished between job work and supply of manpower. Referring to previous judgments, the Tribunal reiterated that job work performed with the help of manpower does not fall under Manpower Recruitment or Supply Agency Service.

Consequently, the Tribunal ruled in favor of the appellant, setting aside the demand for service tax. The judgment highlighted that the job work carried out by the appellant did not constitute supply of manpower and was not taxable under the category of Manpower Recruitment and Supply Agency Service. The decision aligned with previous rulings on similar issues, ultimately allowing the appeal.

This comprehensive analysis of the judgment delves into the interpretation of the job work agreement, the classification of services, control over employees, and the taxability of the job work, providing a detailed understanding of the legal reasoning and outcome of the case.