Adiraj Manpower Services Pvt ltd v. CCE Pune II

Case snapshot

Sections / provisions: Notification No 25/2012 dated 20th June 2012 issued under Finance Act; 1994

Questions before the Court / Tribunal

• Adiraj Manpower Services Pvt ltd Vs CCE Pune II Forum-Supreme Court of India Date-18-02-2022 Sub-Whether services provided are man power services or job work services so as to be exempted under the relevant notifications issued under Finance Act, 1994. The Supreme Court in this case was dealing with the question whether the appellant in this case had provided job work services which were exempted in terms of Serial No 30(c) Notification No 25/2012 dated 20th June, 2012 issued under Finance Act, 1994 or man power services which were fully taxable. The Court relying on the agreement entered into between the parties by observing that there is a complete absence in the agreement of any reference to: (i) the nature of the process of work which has to be carried out by the appellant; (ii) provisions for maintaining (a) the quality of work; (b) the nature of the facilities utilised; or (c) the…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

1 Appeal admitted. A Facts 2 This appeal arises from a judgment dated 15 July 2019 of the Customs, Excise & Service Tax Appellate Tribunal1. 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) 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 suppr essed 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 suppli ed 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 rat es’ 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.

(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 appe llant 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 adjudicated upon by the Commissioner of Central Excise Pune -I, Commissionerate by an 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 3, that the services provided by the appellant were in the nature of contract labour and no t job work. The Tribunal held that (i) clause 10, 11 and 17 of the agreement required the appellant to obtain a licence under the CLRA; (ii) the agreement imposed the responsibility for the payment of wages to the employees/workmen and for making payments under the Employees’ State Insurance Act 1948 and Provident Fund in respect of the employees of the contract or on the appellant. The Tribunal accordingly held that the agreement between the appellant and Sigma is a contract labour agreement executed for the purpose of providing requisite manpower and is not a job work contract to extend the benefit of Notification No.25/2012-Service Tax dated 20 June 2012.

B Submissions 8 Mr Tarun Gulati, senior counsel appearing on behalf of the appellant assailed the decision of the Tribunal by urging the following submissions: (i) The Tribunal held that the appellant satisfied the definition of the expression ‘contractor’ under Section 2(c) of the CLRA; (ii) The definition contained in the CLRA indicates that the expression “contractor” means: (a) A person who undertakes to produce a given result for the establishment through contract labour; or (b) A person who supplies contract labour in any work. (iii) The former covers a job worker while the latter covers a suppl ier of manpower. Since the definition of the expression “contractor” under the CLRA includes within its ambit a job worker, the registration o f the appellant under the statute would not indicate that the appellant is a mere supplier of manpower; (iv) The Tribunal held that under the agreements dated 1 January 2012, 1 January 2013 and 1 January 2014 executed by the appellant , provisions have been made from the payment of wages and other statutory dues in accordance with labour legislation and for giving an indemnity to the principal employer in the event of any liability arising due to a default by the appellant. Sigma is a principal employer who can be made liable if there is any breach in complying with labour legislation. This obligation of the principal employer is imposed by Section 21(4) of the CLRA under which the principal employer has to pay wages in the event of default by

Appellant / petitioner / assessee submissions

The judgment does not separately label this side’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

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.

Operative decision and relief

17 The decisions of CESTAT relied upon by the appellant also do not help their submissions as they are fact -specific a nd based on a reading of the contracts in those cases. In this case, t hough ostensibly, the agreement contains a provision for payment on the basis of the rates mentioned in Schedule II, the agreement has to be read as a composite whole. On reading the agreement as a whole, it is apparent that the contract is pure and simple a contract for the provision of contract labour . An attempt has been made to camouflage the contract as a contract for job work to avail of the exemption from the payment of service tax. The judgment of the Tribunal does not, in the circumstances, suffer from any error of reasoning. 18 For the above reasons we have come to the conclusion that there is no merit in the appeal. The appeal shall accordingly stand dismissed. 19 Pending application(s), if any, stand disposed of.

Ratio and legal principle

The narrow proposition associated with Adiraj Manpower Services Pvt ltd v. CCE Pune II concerns adiraj manpower services pvt ltd vs cce pune ii forum-supreme court of india date-18-02-2022 sub-whether services provided are man power services or job work services so as to be exempted under the relevant notifications issued under finance act, 1994. the supreme court in this case was dealing with the question whether the appellant in this case had provided job work services which were exempted in terms of serial no 30(c) notification no 25/2012 dated 20th june, 2012 issued under finance act, 1994 or man power services which were fully taxable. the court relying on the agreement entered into between the parties by observing that there is a complete absence in the agreement of any reference to: (i) the nature of the process of work which has to be carried out by the appellant; (ii) provisions for maintaining (a) the quality of work; (b) the nature of the facilities utilised; or (c) the… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in Civil Appeal No. 313 of 2021.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Dismissed” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Adiraj Manpower Services Pvt ltd Vs CCE Pune II Forum-Supreme Court of India Date-18-02-2022 Sub-Whether services provided are man power services or job work services so as to be exempted under the relevant notifications issued under Finance Act, 1994. The Supreme Court in this case was dealing with the question whether the appellant in this case had provided job work services which were exempted in terms of Serial No 30(c) Notification No 25/2012 dated 20th June, 2012 issued under Finance Act, 1994 or man power services which were fully taxable. The Court relying on the agreement entered into between the parties by observing that there is a complete absence in the agreement of any reference to: (i) the nature of the process of work which has to be carried out by the appellant; (ii) provisions for maintaining (a) the quality of work; (b) the nature of the facilities utilised; or (c) the… Its practical value lies in the way the Supreme Court of India connected the governing provisions—Notification No 25/2012 dated 20th June 2012 issued under Finance Act; 1994—to the procedural posture and evidence before it.

The authority level is Supreme Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of Notification No 25/2012 dated 20th June 2012 issued under Finance Act; 1994 and the decision date 2022-02-18; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

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Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Adiraj Manpower Services Pvt ltd v. CCE Pune II, the proceeding is Civil Appeal No. 313 of 2021, and the decision is dated 2022-02-18. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as Dr Dhananjaya Y Chandrachud, J. (authoring judge identified in judgment). A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with Notification No 25/2012 dated 20th June 2012 issued under Finance Act; 1994. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Dismissed. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_CURATIVE_DOCKET_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• Notification No 25/2012 dated 20th June 2012 issued under Finance Act — apply the exact version considered in the judgment.
• 1994 — apply the exact version considered in the judgment.

Case network

• CCE Aurangabad Vs Videocon Industries Limited — Supreme Court of India · Dismissed
• Pr. CIT (Central)-1 v. Surendra L. Hiranandani — Bombay High Court · Dismissed
• Anil Ramchandran Pillai v. NFAC — Bombay High Court · Dismissed
• Assistant Director, Directorate of Enforcement v. Kamal Ahsan — Supreme Court · Dismissed

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