2026-VIL-683-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Classification of Service as Manpower Recruitment or Supply Agency Service or Job Work – Appellant provided services to the second appellant for the manufacturing of Hot Rolled Products - Dept classified the activity as 'Manpower Recruitment and Supply Agency Service' and demanded service tax from the appellants. The appellants contended that the activity was in the nature of job work and not a supply of manpower - Whether the arrangement between the parties is a contract of service (employer-employee relationship) or a contract for service (job work) - HELD - The arrangement between the parties was a contract for service (job work) and not a contract of service. The obligation was output-oriented, with the consideration fixed as job charges per metric tonne, which was linked to the results and not the manpower or time. The contractor bore the economic risk and reward, evidencing a real chance of profit and risk of loss, which is incompatible with employment - The contract expressly stipulated that the labour remains under the exclusive control of the contractor, with the principal exercising no control whatsoever, which conclusively negates a master–servant relationship. Applying the control test, mode of remuneration, integration test, and the multifactor economic test, it is concluded that the contractual arrangement qualifies as job work (contract for service) and not a contract of service. The tax planning done by an assessee that results in the mitigation of tax is not a blameworthy conduct inviting penal consequences, unless it is shown by the revenue to be triggered by a fraudulent intention, which was not established in the present case - The impugned order is set aside and the appeal is allowed
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