Case: Adiraj Manpower Services Pvt. Ltd Vs. Commissioner of Central Excise Pune II

payment will be as described by the Government Authorities. 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 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, 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 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. 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 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. 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 equipments materials etc. to his personnel on his (Contractors) responsibility and will keep proper record of it. In case of any shortcomings the Contractor is liable 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 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, 410501, which consists of plant area, offices, stores, canteen, utilities, open land, scrap yard etc. SCHEDULE II The rate per Kg is given below Particulars Copper/kg Zinc/kg Aluminium/kg Steel/kg Felting 0.83 Material Handling 0.58 Packing Pouring Supply Cast/Machined Parts 2.49 Painting Total 2.49 1.41 0.00 0.00 14. The submission of the appellant is that under the terms of the 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 establishment by engaging contract labour. 15. Under the CLRA, the expression contractor is defined to 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 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 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 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 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 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. 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 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]16. The substratum of the agreement between the appellant and Sigma 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 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 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.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 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.