Contractor fabrication work using principal's materials at its premises is job work, not manpower supply, absent employer-employee control.

Per M. Ajit Kumar,

As both appeals involve a common issue, they were heard together and are disposed of by this common order. The appeals challenge Orders-in-Appeal Nos. 242 and 243/2016 (CXA-I) both dated 31.10.2016, passed by the Commissioner of Central Excise (Appeals-I), Chennai.

2. Brief facts of the case are that the appellants being contractors are engaged by M/s. Larsen & Toubro Ltd. (L&T), During the course of verification of the accounts of L&T, for the period July 2012 to March 2014, by the department, it was noticed that L&T had engaged the services of the appellants for carrying out various operations. As all materials, including power, were allegedly supplied and controlled by L&T, the department was of the view that the consideration paid to the appellants was towards supply of manpower and was taxable under the category of ‘Supply of manpower’. Accordingly, Show Cause Notices dated 14.08.2014 were issued demanding service tax of Rs. 1,86,049 and Rs. 16,511 respectively, along with interest and penalty,. The demands were confirmed with equal penalty under Section 78 of the Finance Act, 1994. The appeals against these orders were rejected by the Commissioner (Appeals), leading to the present appeals.

3. The learned Advocate Shri N. Viswanathan appeared for the appellants and Ld. Authorized Representative Smt. G. Krupa appeared for the respondent.

3.1 Shri N. Viswanathan the Ld. Counsel for the appellants submitted as follows:

1. The appellants are independent contractors who undertook fabrication of towers for L&T under work orders providing payment on quantity/tonnage for specified job work activities.

2. The work orders required compliance with labour laws, VAT registration and payment of VAT, expressly stated that no service tax was applicable, and payments were made after TDS under Section 194 of the Income Tax Act.

3. Without examining the work orders and relying solely on L&T’s financial statements, the Department wrongly treated the job work as manpower supply merely because the work was executed at L&T’s premises using its materials and power.

4. Show cause notices proposed service tax on 25% of the alleged value under Notification No. 30/2012-ST with interest and penalties, without raising any demand on the balance 75% against L&T.

5. The work orders, the Board’s 2015 circular, and consistent Tribunal decisions clearly establish that the activity is principal-to-principal job work and not manpower supply, warranting setting aside of the impugned orders with consequential benefits.

6. The appellants submit that, in respect of the second appellant, the very same first appellate authority had earlier set aside the order of the original authority for failure to examine the merits of the case. The said order was accepted by the Revenue, as no further appeal was preferred.

7. The appellants further submit that, in the case of another identically placed contractor, Mr. Vel Murugan, the first appellate authority, by a subsequent order for the same period, decided the issue on merits in his favour. This order too has been accepted by the Revenue without any further appeal before this Hon’ble Tribunal.

The Ld. Counsel prayed that the appeals may be allowed.

3.2 Smt. G. Krupa Ld. A.R. who appeared for the respondent- revenue, supported the impugned orders and submitted that the contractors merely supplied workmen. Since the materials, power and machinery were provided by the assessee and the work was carried out within the factory premises under its supervision and control, she contended that the activity was correctly classif