2023 (7) TMI 767 - AT - Service Tax

Classification of services - certain works/subcontracts awarded by the Appellant company for execution of works contract (sub-contract) - service received by the Appellant from the sub-contractors is in the nature of Manpower Supply Service or Works Contract Service? HELD THAT - From a plain reading of the Work Order, it is evident that the Work Order is not for supply of manpower service, but it is work awarded for construction activity specifying the rate payable for particular quantum of work to be executed. Further, it is not disputed that the sub-contractor has got full liberty to employ such number of workmen and use such quantum and variety of tools and tackles as may be required. Further, the Appellant company as the Principal is not obligated, though Appellant supervised the work of the sub-contractor from time to time. Further, there is no rate specified per workmen to be provided by the sub-contractor - It is also held that as the main contract is for construction activity, undisputedly in the nature of Works Contract service, the sub-contractor having been awarded the part of such work, is also classifiable rightly under Works Contract service. The service in question received by the Appellant is in the nature of Construction service and/or Works Contract service and not Manpower Supply service, under any stretch of imagination - Appeal allowed.

Summary

Issues involved: Determination of whether the service received by the appellant from sub-contractors is Manpower Supply Service or Works Contract Service.

Summary:
The Appellant, a company engaged in civil constructions, was under scrutiny for booking certain expenses as 'Labour Charges' and 'Construction expenses' in their accounts, which the Revenue alleged to be Manpower Supply services attracting service charge under Reverse Charge Mechanism. The Revenue issued a Show Cause Notice (SCN) proposing a demand and penalties for the period under dispute. The Appellant contended that the work awarded to sub-contractors was for construction activity involving goods, not Manpower Supply service. The Principal Commissioner in a similar case for a subsequent period observed that the services were construction and works contract services due to the involvement of materials. Relying on this finding, the Appellant appealed for similar treatment.

Upon review, the Tribunal found that the Work Order was for construction activity with rates specified for work to be executed, allowing the sub-contractor freedom to employ workmen and use tools as needed. The Appellant was not obligated to provide workmen, and no specific rate per workman was mentioned. As the main contract was for construction activity, the sub-contractor's work fell under Works Contract service. Therefore, the service received by the Appellant was deemed to be Construction service and/or Works Contract service, not Manpower Supply service. The Tribunal allowed the Appeal and set aside the Impugned Order, granting the Appellant consequential benefits as per the law.