Holding

The agreement is a pure contract‑labour arrangement and does not qualify as job work under the exemption, so the service tax demand stands.

Summary

The appellant, Adiraj Manpower Services Pvt. Ltd., a manpower recruitment agency, entered into agreements with Sigma Electric Manufacturing to supply personnel for various manufacturing activities. The Commissioner of Central Excise issued a show‑cause notice alleging that the appellant had failed to assess and pay service tax on the supply of manpower, had filed incorrect returns and attempted to claim exemption under Notification No. 25/2012 (para 30(c)) by characterising the supply as ‘job work’. The adjudicating authority confirmed the tax demand, and the CESTAT held that the services were contract‑labour and not job‑work, rejecting the exemption claim. On appeal, the Supreme Court examined whether the agreement constituted a genuine job‑work contract or a pure contract‑labour arrangement, focusing on the absence of specifications, process details, delivery schedules and quality provisions in the agreement. The Court held that the agreement was a contract for the provision of contract labour, and the attempt to camouflage it as job work was untenable, thereby affirming the Tribunal’s decision. Consequently, the appeal was dismissed.

Issues considered

The services supplied by the appellant fall within the definition of “job work” under Notification No. 25/2012 Service Tax (para 30(c)) and are thus exempt from service tax
The agreement between the appellant and Sigma constitutes a contract for job work or a contract for the supply of contract labour
The definition of “contractor” under the Contract Labour (Regulation and Abolition) Act, 1970 and its impact on tax liability
The appellant’s classification of the services as “business auxiliary services” under the Service Tax law

Legislation cited

Contract Labour (Regulation and Abolition) Act, 1970s. 21(4), s. 2(c)
Employees' State Insurance Act, 1948
Finance Act, 1994s. 66(B)
Provident Fund Act
Service Tax Rules, 1994s. Rule 7

Subjects

Service TaxContract Labour ActJob work exemptionManpower supplyTax liabilityContract interpretationCESTATCentral ExciseContractor vs job workerNotification 25/2012

Judgment

1150 SUPREME COURT
[2022]REPORTS
1 S.C.R. 1150 [2022] 1 S.C.R.

A ADIRAJ MANPOWER SERVICES PVT. LTD.
v.
COMMISSIONER OF CENTRAL EXCISE PUNE II
(Civil Appeal No. 313 of 2021)
B
FEBRUARY 18 , 2022
[DR DHANANJAYA Y CHANDRACHUD AND
SURYA KANT, JJ.]
The Contract Labour (Regulation and Abolition) Act, 1970 –
C Service Tax –Appellant obtained service tax registration under the
category of ‘Manpower Recruitment or Supply Agency Service’ –
Appellant entered into an agreement with a company ‘S’ and was
required to provide personnel for manufacturing activities-
Commissioner of Central Excise, Pune issued show cause notice to
D appellant demanding service tax – Allegations were that appellant
had failed to assess and discharge service tax liability regarding
supply of manpower to company ‘S’, suppressed the facts and made
a misrepresentation by filling incorrect ST-returns – The adjudicating
authority held that appellant habitually delayed paying service tax
and that supply of labour by appellant to ‘S’ on piecemeal basis did
E not alter the characteristic of manpower services provided – Order
was challenged in appeal before Tribunal – Tribunal held that
service provided by appellant to ‘S’ was not in nature of job work
service liable to be exempted, but in the nature of contract labour –
On appeal, held: Issue is whether the apellant is job worker or is
F merely a supplier of contract labour for the work of the establishment
– The fact that the appellant is not a job worker is evident from a
conspicuous absence in the agreement of crucial contractual terms
which would have been found had it been a true contract – 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 –
G
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 – Judgment of Tribunal does not suffer from any error of
reasoning.

H
1150
ADIRAJ MANPOWER SERVICES PVT. LTD. v. COMMISSIONER OF 1151
CENTRAL EXCISE PUNE II

Dismissing the appeal, the Court A
HELD:1.1. The substratum of the agreement between the
appellant and company ‘S’ deals with the regulation of the
manpower which is supplied by the appellant in his capacity as a
contractor. The fact that the appellant is not a job worker is
evident from a conspicuous absence in the agreement of crucial B
contractual terms which would have been found had it been a
true contract for the provision of job work in terms of Para 30(c)
of the exemption notification. 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 C
utilised; or (c) the infrastructure deployed to generate the work;
(iii) the delivery schedule; (iv) specifications in regard to the work
to be performed; and (v) consequences which ensue in the event
of a breach of the contractual obligation. [Para 16][1161-D-G]
1.2. The decisions of CESTAT relied upon by the appellant D
also do not help their submissions as they are fact-specific and
based on a reading of the contracts in those cases. In this case,
though 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 E
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. [Para 17][1161-G-H; 1162-A-B] F

Om Enterprises v. Commissioner of Central Excise,
Pune-I 2018 (17) G.S.T.L. 260 ; Bhagyashree
Enterprises v. Commissioner 2017 (3) G.S.T.L.515;
Dhanashree Enterprises v. Commissioner 2017 (5)
G.S.T.L. 7 2019 SCC OnLine; S. Balasubramani v. G
Commissioner 2019 SCC OnLine CESTAT 480-
referred to.

H
1152 SUPREME COURT REPORTS [2022] 1 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No.313 of
2021.
From the Judgment and Order dated 15.07.2019 of the Customs,
Excise & Service Tax Appellate Tribunal, West Zonal Bench, Mumbai
in Service Tax Appeal No.86153 of 2015 in Final Order No.A/86237 of
B 2019.
Tarun Gulati, Sr. Adv., Rohit Rathi, Kumar Sambhav, Sameer
Shrivastava, Advs. for the Appellant.
N. Venkataraman, ASG, Arijit Prasad, Sr. Adv., Mukesh Kumar
C Maroria, Ms. Alka Agarwal, Rupesh Kumar, Ms. Vimla Sinha, B. K.
Satija, Raghav Sharma, Advs. for the Respondent.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, J.

D A Facts.........................................................................3
B Submissions..............................................................7
C Analysis..................................................................10

E 1. Appeal admitted.
A Facts
2. This appeal arises from a judgment dated 15 July 2019 of the
Customs, Excise & Service Tax Appellate Tribunal1.
F
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
G 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.

1
“CESTAT”
2
H “Sigma”
ADIRAJ MANPOWER SERVICES PVT. LTD. v. COMMISSIONER OF 1153
CENTRAL EXCISE PUNE II [DR. DHANANJAYAY CHANDRACHUD, J.]

4. On 26 September 2014, a notice to show cause was issued by A
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 B
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 C
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 D
(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 E
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’; F
(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 G
(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 upto July 2012;
H
1154 SUPREME COURT REPORTS [2022] 1 S.C.R.

A (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
B
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,
C 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
D 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
E 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:
F (i) The appellant habitually delayed payingservice taxevery
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
G (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
H and interest besides imposing penalty.
ADIRAJ MANPOWER SERVICES PVT. LTD. v. COMMISSIONER OF 1155
CENTRAL EXCISE PUNE II [DR. DHANANJAYAY CHANDRACHUD, J.]

7. The order of the adjudicating authority was challenged in an A
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 ofjob 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
B
appellant and Sigma and the relevant provisions of the Contract Labour
(Regulation and Abolition) Act 19703, that the services provided by the
appellant were in the nature of contract labour and not 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 C
and for making payments under the Employees’ State Insurance Act
1948 and Provident Fund in respect of the employees of the contractor
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
D
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 E
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 F
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. G
(iii) The former covers a job worker while the latter covers a
supplier of manpower. Since the definition of the expression
“contractor” under the CLRA includes within its ambit a

3
“CLRA” H
1156 SUPREME COURT REPORTS [2022] 1 S.C.R.

A job worker, the registration of 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
B 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
C 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 the contractor. Service 21(4) permits the principal
employer to recover the amounts so paid from the contractor.
D The agreements merely replicate what is contemplated by
the statute;
(v) The agreements between the appellant and Sigma are job
work agreements. Under the terms of each agreement, the
appellant is required to provide specialized services in
E respect of felting, material handling, assembly, pouring,
supply of machine parts, and painting. The contractor has
to determine the persons to be engaged for performing the
contract and their service conditions and the appellant is
entrusted with supervision as the contractor. There is no
supply of manpower to Sigma, since in that case the control
F would have shifted to Sigma. However, in this case, it is the
appellant who exercises due supervision; and
(vi) The invoices were based on the work done on piece rate
basis. A service charge has been levied on the quantity of
work done and not on the quantity of the manpower supplied.
G In Om Enterprises v. Commissioner of Central Excise,
Pune-I,4 the CESTAT held that when a contractor carries
out a process work and charges the principal employer on
rate per piece, the nature of work would be considered as

4
H 2018 (17) G.S.T.L. 260
ADIRAJ MANPOWER SERVICES PVT. LTD. v. COMMISSIONER OF 1157
CENTRAL EXCISE PUNE II [DR. DHANANJAYAY CHANDRACHUD, J.]

job work and not manpower supply. The CESTAT has A
rendered similar findings in Bhagyashree Enterprises v.
Commissioner 5 , Dhanashree Enterprises v.
Commissioner6, & S. Balasubramani v. Commissioner7,
where it refused to consider piece rate work as manpower
supply, and held that it was job work.
B
9. Opposing the above submissions, Mr N Venkataraman,
Additional Solicitor General submitted that
(i) Entry 30(c) of Notification 25/2012-Service Tax dated 20
June 2012 envisages the carrying out of intermediate
production process as job-work in relation to any goods on C
which appropriate duty is payable by the principal
manufacturer.
(ii) The above provision contemplates carrying out of
intermediate production process as job work in relation to
any goods on which duty is payable by the principal D
manufacturer. In other words, it covers a situation where
the principal manufacturer pays tax on the value of the final
goods which would include the cost of the job work;
(iii) The agreements which have been executed by the appellant
with Sigma are not for carrying out job work and camouflage E
the supply of manpower services;
(iv) The provisions of the agreements executed by the appellant
indicate that appellant is required to cover the supply of
manpower services to Sigma as distinct from the
performance of job work. The contracts are pure labour F
contracts in which there is a conspicuous absence of details
or specifications pertaining to the work which is to be
performed, the output to be generated, and delivery
schedules, among other crucial elements of a genuine
contract for job-work ; and
G
(v) If the services provided by the appellant were of the
category of “intermediate production process as job work”,

5
2017 (3) G.S.T.L.515
6
2017 (5) G.S.T.L.
7
2019 SCC OnLine CESTAT 480
H
1158 SUPREME COURT REPORTS [2022] 1 S.C.R.

A the appellant would havedeclared them under the category
of “business auxiliary services” or would have claimed
exemption to the extent of the value of services under
Notification No. 25/2012-Service Tax dated 20 June 2012.
However, the appellants suppressed the taxable value. They
neither amended their service tax registration, nor declared
B
these services in their ST-3 returns as business auxiliary
services.
10. The rival submissions now fall for consideration.
C Analysis
C 11. The appellant has sought the benefit of Notification No. 25/
2012-Service Tax dated 20 June 2012. Under the terms of the notification,
the Central Government exempted certain taxable services from the
whole of the service tax leviable under Section 66(B) of the Finance Act
1994. Para 30(c) of the notification reads as follows:
D “30. Carrying out an intermediate production process as job
work in relation to
…
(c) any goods on which appropriate duty is payable by
the principal manufacturer.”
E
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.
12. The agreement which was entered into between the appellant
and Sigma on 1 January 2012, inter alia contains the following provisions:
F
“7, The “Contractor” shall decide its own complement to be
engaged for performance of this contract and the Company will
not interfere in the decision of the Contractor in
this respect.
G […]
9. It will be the sole duty and discretion of the Contractor to recruit
his own personnel of this own choice. The personnel engaged by
the Contractor will work under the direct control, supervision ·and
administration of the Contractor and the Company will have no
H right to interfere in it.
ADIRAJ MANPOWER SERVICES PVT. LTD. v. COMMISSIONER OF 1159
CENTRAL EXCISE PUNE II [DR. DHANANJAYAY CHANDRACHUD, J.]

10. It is also agreed between the parties that the contractor shall A
decide the service conditions of the employees engaged by the
contractor but ensure that he will pay them the wages not less
than the rates of minimum wages as applicable for his scheduled
industry. The mode of payment will be as described by the
Government Authorities.
B
11 It is agreed between the parties that the contractor shall take
necessary licence whenever required under the provisions of
Contract labour (Regulation & Abolition) Act, 1970 and shall submit
a copy of the same to the Company.
12. The Contractor shall maintain various records, registers, and
C
shall submit timely returns required under legislation, rules and
regulations as applicable to him and his personnel. The contractor
shall submit xerox copies of musters vouchers to the company in
respect of his personnel.
13. The Contractor indemnifies the Company that he shall bear
any burden of whatsoever nature like fees, fines, penalty, damages, D
rise in wages, HRA, Back-wages etc in respect of his personnel
under the provisions of any law.
[…]
16. The Contractor ensures that he will maintain the discipline
among his own employees. In case of any misbehavior or E
misconduct by the personnel engaged by the Contractor, the
Contractor shall take proper action against such person, the
Company shall not have any right to take such action. In the event
if the Contractor docs not take proper action the contract is liable
to be terminated without notice. F
17. The Contractor shall pay timely dues under ESI Act, Provident
Fund if applicable in respect of his persons I employees and shall
maintain Registers, submit returns under
ESI Act and Provident fund Act. If due to failure of the Contractor
any financial or otherwise burden costs on the Company is at G
liberty to recover the same from the bills of the Contractor.
[…]
23. The Contractor shall fix the duty and timings of his own
personnel as per his own requirement. However, it shall not conflict
with the working of the Company and its employees. H
1160 SUPREME COURT REPORTS [2022] 1 S.C.R.

A 24. The Contractor indemnifies the Company against any liability
that may arise because of the persons engaged by him.
25. The Contractor will issue the equipment’s materials etc. to his
personnel on his (Contractor’s) responsibility and will keep proper
record of it. In case of any shortcomings the Contractor is liable
B to pay the costs of the same to the Company. In the event of any
doubts as to interpretation of the clauses in this agreement, the
interpretation of the Company shall be final and binding on the
Contractor.”
13. Schedules (I) and (II) of the agreement have been extracted
C in the judgment of the Tribunal and are reproduced below:
“SCHEDULE “I”
Provide services for Felting, Material Handling, Assembly, Pouring,
Supply of Cast& machine part, Painting, at our establishment
situated at Gate No. 154/1 & 155/1, Mahalunge, Chakan, Pune,
D 410501, which consists of plant area, offices, stores, canteen,
utilities, open land, scrap yard etc.
SCHEDULE “II”
The rate per Kg is given below

E

F

14. The submission of the appellant is that under the terms of the
G CLRA, the definition of the expression “contractor” covers both a person
who undertakes to produce a given result as well as a supplier of
manpower service. Hence it is urged that though the appellant has to be
registered as a contractor under the CLRA, that is because the appellant
falls within the definition of the expression “contractor” in Section 2(c),
as a person who undertakes to produce a given result for the
H establishment by engaging contract labour.
ADIRAJ MANPOWER SERVICES PVT. LTD. v. COMMISSIONER OF 1161
CENTRAL EXCISE PUNE II [DR. DHANANJAYAY CHANDRACHUD, J.]

15. Under the CLRA, the expression “contractor” is defined to A
mean:
(i) A person who undertakes to produce a given result for the
establishment, other than a mere supply of goods or articles
of manufacture through contract labour; and
(ii) A person who supplies contract labour for any work of the B
establishment including a sub-contractor.
The definition covers, in the latter part, the supply of contract
labour for any work of the establishment. But in the first part noted
above, it comprehends a person who undertakes to produce a result for
the establishment other than a mere supply of goods and services. The C
issue before the Court is whether the appellant is a job worker within the
meaning of the exemption notification dated 20 June 2012 or is merely a
supplier of contract labour for the work of the establishment.
16. The substratum of the agreement between the appellant and
Sigma deals with the regulation of the manpower which is supplied by D
the appellant in his capacity as a contractor. The fact that the appellant
is not a job worker is evident from a conspicuous absence in the
agreement of crucial contractual terms which would have been found
had it been a true contract for the provision of job work in terms of Para
30(c) of the exemption notification. There is a complete absence in the E
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 infrastructure F
deployed to generate the work;
(iii) the delivery schedule;
(iv) specifications in regard to the work to be performed; and
(v) consequences which ensue in the event of a breach of the G
contractual obligation.
17. The decisions of CESTAT relied upon by the appellant also do
not help their submissions as they are fact-specific and based on a reading
of the contracts in those cases. In this case, though ostensibly, the
agreement contains a provision for payment on the basis of the rates H
1162 SUPREME COURT REPORTS [2022] 1 S.C.R.

A 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
B
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.
C
Bibhuti Bhushan Bose Appeal dismissed.
(Assisted by : Shubhanshu Das, LCRA)

D

E

F

G

H