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TMI Blog2022 (2) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... ower Recruitment or Supply Agency Service'. On 1 January 2012, the appellant entered into an agreement with Semco Electric Pvt. Ltd. (later known as Sigma Electric Manufacturing Corporation Pvt. Ltd. "Sigma") and was required to provide personnel for activities such as felting, material handling, pouring and supply of material to furnace. Similarly, on 1 January 2013 and 1 January 2014, fresh agreements were entered into between the appellant and Sigma. 4 On 26 September 2014, a notice to show cause was issued by the Commissioner of the erstwhile Pune-I Central Excise Commissionerate demanding service tax along with interest and with a proposed penalty of Rs. 10,50,23,672. The allegations in the show cause notice were that: (i) The appellant had failed to pay their service tax dues on or before the due date for the period from April 2012 to March 2014; (ii) The appellant had failed to assess and discharge service tax liability on the service value in accordance with their sales ledgers relating to Sigma for the period from September 2012 to March 2014 regarding the supply of manpower; (iii) The appellant had suppressed the facts and made a misrepresentation by filing incorre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 24 February 2015. The adjudicating authority held that: (i) The appellant habitually delayed paying service tax every month from April 2012 to March 2014; (ii) The appellant did not have any machinery or equipment of its own and was using the equipment and machinery of Sigma at the latter's premises; and (iii) The supply of labour by the appellant to Sigma for doing the work of fettling, material handling, assembly and pouring on 'piecemeal basis' did not alter the characteristics of the manpower services provided by the appellant to Sigma. The adjudicating authority confirmed the demand of service tax and interest besides imposing penalty. 7 The order of the adjudicating authority was challenged in an appeal before the CESTAT, WZB, Mumbai. By its judgment dated 15 July 2019, the Tribunal held that the service provided by the appellant to Sigma was not in the nature of job work services exempted under the Notification bearing No.25/2012-Service Tax dated 20 June 2012. The Tribunal held, after considering the terms of the agreement between the appellant and Sigma and the relevant provisions of the Contract Labour (Regulation and Abolition) Act 1970 "CLRA", that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... replicate what is contemplated by the statute; (v) The agreements between the appellant and Sigma are job work agreements. Under the terms of each agreement, the appellant is required to provide specialized services in respect of felting, material handling, assembly, pouring, supply of machine parts, and painting. The contractor has to determine the persons to be engaged for performing the contract and their service conditions and the appellant is entrusted with supervision as the contractor. There is no supply of manpower to Sigma, since in that case the control would have shifted to Sigma. However, in this case, it is the appellant who exercises due supervision; and (vi) The invoices were based on the work done on piece rate basis. A service charge has been levied on the quantity of work done and not on the quantity of the manpower supplied. In Om Enterprises v. Commissioner of Central Excise, Pune-I, 2018 (17) G.S.T.L. 260 the CESTAT held that when a contractor carries out a process work and charges the principal employer on rate per piece, the nature of work would be considered as job work and not manpower supply. The CESTAT has rendered similar findings in Bhagyashree Ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax leviable under Section 66(B) of the Finance Act 1994. Para 30(c) of the notification reads as follows: "30. Carrying out an intermediate production process as job work in relation to ... (c) any goods on which appropriate duty is payable by the principal manufacturer." This provision therefore comprehends: (i) carrying out an intermediate production process; (ii) as job work; (iii) in relation to goods on which appropriate duty is payable by the principal manufacturer. 12 The agreement which was entered into between the appellant and Sigma on 1 January 2012, inter alia contains the following provisions: "7, The "Contractor" shall decide its own complement to be engaged for performance of this contract and the Company will not interfere in the decision of the Contractor in this respect. [...] 9. It will be the sole duty and discretion of the Contractor to recruit his own personnel of this own choice. The personnel engaged by the Contractor will work under the direct control, supervision *and administration of the Contractor and the Company will have no right to interfere in it. 10. It is also agreed between the parties that the contractor shall decide the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation of the clauses in this agreement, the interpretation of the Company shall be final and binding on the Contractor." 13 Schedules (I) and (II) of the agreement have been extracted in the judgment of the Tribunal and are reproduced below: "SCHEDULE "I" Provide services for Felting, Material Handling, Assembly, Pouring, Supply of Cast & machine part, Painting, at our establishment situated at Gate No. 154/1 & 155/1, Mahalunge, Chakan, Pune, 410501, which consists of plant area, offices, stores, canteen, utilities, open land, scrap yard etc. SCHEDULE "II" The rate per Kg is given below Particulars Copper/kg Zinc/kg Aluminium/kg Steel/kg Felting 0.83 Material Handling 0.58 Packing Pouring Supply Cast/Machined Parts 2.49 Painting Total 2.49 1.41 0.00 0.00 14 The submission of the appellant is that under the terms of the CLRA, the definition of the expression "contractor" covers both a person who undertakes to produce a given result as well as a supplier of manpower service. Hence it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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