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2022 Supreme(SC) 187
SUPREME COURT OF INDIA
(From the Custom Excise Service Tax Apellate Tribunal, West Zonal Bench at Mumbai)
Dhananjaya Y. Chandrachud, Surya Kant, JJ.
Adiraj Manpower Services Pvt. Ltd. – Appellant
Versus
Commissioner of Central Excise Pune II – Respondent
Civil Appeal No. 313 of 2021
Decided on : 18-02-2022
For the Appellant :Tarun Gulati, Rohit Rathi, Rahul Totala, Kumar Sambhav, Sameer Shrivastava, Advocates
For the Respondent:Alka Agrawal, Mukesh Kumar Maroria, Advocates
Headnote:
Service Tax - Manpower Recruitment or Supply Agency Service - Contract Labour (Regulation and Abolition) Act 1970 - Notification No.25/2012-Service Tax dated 20 June 2012 - [JOB WORK, CONTRACT LABOUR, SERVICE TAX RULES 1994, CLRA]
Fact of the Case:
The appellant obtained service tax registration under the category of 'Manpower Recruitment or Supply Agency Service' and entered into agreements with Sigma for providing personnel. The Commissioner demanded service tax, alleging non-payment, incorrect ST-3 returns, and failure to obtain service tax registration under business auxiliary services. The adjudicating authority confirmed the demand, and the Tribunal upheld that the services provided were not exempted job work services.
Finding of the Court:
The Tribunal held that the services provided were in the nature of contract labour and not job work, based on the terms of the agreement and relevant provisions of the Contract Labour (Regulation and Abolition) Act 1970. The Court dismissed the appeal, concluding that the contract was for the provision of contract labour, camouflaged as a job work contract to avail of service tax exemption.
Issues: The key issue was whether the services provided by the appellant to Sigma constituted job work services exempted under Notification No.25/2012-Service Tax dated 20 June 2012 or were in the nature of contract labour.
Ratio Decidendi: The Court analyzed the terms of the agreement, absence of crucial contractual terms for job work, and the definition of 'contractor' under the Contract Labour (Regulation and Abolition) Act 1970 to determine that the appellant was a supplier of contract labour, not a job worker.
Final Decision: The Court concluded that the appeal had no merit and dismissed it.
JUDGMENT
Dr. Dhananjaya Y. Chandrachud, J.
| A | Facts | 3 |
| B | Submissions | 7 |
| C | Analysis | 10 |
A Facts
2. This appeal arises from a judgment dated 15 July 2019 of the Customs, Excise & Service Tax Appellate Tribunal1["CESTAT"].
3. The appellant obtained service tax registration under the category of 'Manpower 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. 2["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 incorrect ST-3 returns for the above period and did not declare the true and correct taxable value and service tax thereon; and
(iv) The appellant had filed ST-3 returns for the period between April 2013 to September 2013 after the due date as stipulated under Section 70(1) of the Finance Act 1994 and Rule 7 of the Service Tax Rules 1994.
5. The allegations in the show cause notice were based on material collected during the course of an investigation by the Department, indicating that:
(i) The appellant had obtained service tax registration under the category of 'Manpower Recruitment or Supply Agency Service';
(ii) The bills were raised by the appellant on their customers on a monthly basis for providing manpower supply services and service tax was charged thereon;
(iii) The supply of manpower services by the appellant conformed to the provisions of the Contract Labour (Regulation and Abolition) Act 1970;
(iv) In respect of the services of manpower supplied by the appellant to their customer, namely Sigma, the appellant had charged and paid service tax up to July 2012;
(v) From 1 August 2012, based on an agreement dated 1 January 2012, the appellant had termed the service activity as 'job work with tonnage rates' and had not charged and paid service tax, classifying the provision of the said services as business auxiliary services, claiming the benefit of a service tax exemption specified at Serial No. 30(c) of Notification No.25/2012-Service Tax dated 20 June 2012;
(vi) The invoices raised by the appellant and its agreement dated 1 January 2012 and 1 January 2013 indicated that the services provided by the appellant were of supplying skilled/unskilled manpower for carrying out activities like material handling, assembly, pouring, supply of cast machine parts and painting within the factory premises of Sigma which was confirmed by the director of the appellant in his statement recorded on 6 February 2014;
(vii) The nature of the services provided by the appellant was similar before and after August 2012;
(viii) The appellant had not substantiated their claim of job work; and
(ix) The appellant had not obtained service tax registration under the category of business auxiliary services for the period from September 2012 to March 2014.
6. The show cause notice was adju
