2026-VIL-1366-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Manpower supply service - Classification of contract as labour contract or job work - Appellant was engaged to operate plant and machinery and execute the entire manufacturing process by deploying its own labour for production of goods - Whether the activity undertaken by appellant was manpower supply service or contract for job work or manufacture of goods – HELD - The work order must be examined in entirety and not in isolation. Reading the various clauses of the work order as a whole leaves no manner of doubt that it was a work order for labour contract - Though the measure of consideration was on per MT basis, the bills were explicitly stated to be labour bills to be submitted every month and to be paid every month - The settlement of contract clearly reflects consensus ad idem that appellant was appointed as labour contractor. The dominant nature of activity continues to be supply of manpower even when payment is linked to output or productivity - The activity undertaken by appellant constitutes manpower supply service which is taxable under service tax - The impugned order is upheld and the appeal is dismissed - Service Tax - Invocation of extended period on ground of suppression and intent to evade payment - Appellant was well aware of the nature of the contract being labour supply but chose not to disclose and pay service tax - Department seeks to validate demand on basis of Form 16A - Whether extended period of limitation was justified and whether penalty under Section 78 can be upheld - HELD - The appellant was well aware of the nature of contract as labour supply and there was no doubt of any kind. The fact that appellant did not come clean and produce all records justifies that investigation was to be done on basis of accounts available. Form 16A shows that appellant was paid certain sums and tax was deducted from them. The nature of business of appellant is clear from the contract. If the sums received were not for rendering taxable services but for some other purpose, it was for appellant to say so. No such indication was found in the submissions and synopsis of the appellant. The invocation of extended period of limitation was justified as there was willful non-payment of tax with intention to evade. The penalty under Section 78 is also justified - The extended period of limitation was rightly invoked. The penalty under Section 78 imposed by the Adjudicating Authority is sustainable. The impugned order upholding the demand with interest and penalty is upheld.
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