The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that billing by work-output and not by man-days defeats classification under manpower supply, and recorded transactions bar a suppression-based time-bar argument. The CESTAT clarified that a contractor billing on a per cubic meter or per square meter basis for civil works, with no man-day rate and no fixed headcount, cannot be treated as a manpower supply service provider.
The CESTAT further held that a mere deployment of own workmen by a civil contractor does not convert an executed-work contract into a manpower supply arrangement. Where the Department itself extracts transaction data from the assessee’s regularly maintained books of accounts, the demand is barred by limitation. Hence, the Tribunal said that a manufacturer of dutiable goods entitled to Cenvat credit cannot be accused of suppression, since any Service Tax paid on RCM would have been creditable. Accordingly, the Tribunal set aside the confirmed demand of Rs. 4.23 lakhs with consequential relief.
Briefly, Dalmia Cement (Bharat) Ltd (formerly Dalmia Cement East Limited), operating the Bokaro Jaypee Cement Plant at Bokaro, was issued a Show Cause Notice demanding Service Tax of Rs. 44.81 lakhs on the ground that services received from M/s Shree Durga Enterprises during July 2012 to December 2024 were in the nature of ‘Manpower Supply Services’, and that the Appellant was liable to discharge Service Tax on Reverse Charge Mechanism (RCM) basis.
The Adjudicating Authority dropped the demand to the extent of Rs. 40.57 lakhs and confirmed the balance demand of Rs. 4.23 lakhs, holding that the service provider had supplied manpower. The Commissioner (Appeals) dismissed the appeal, after which the Appellant approached CESTAT Kolkata and produced the Work Order issued to M/s Shree Durga Enterprises, which clearly recorded that the contractor was to undertake civil works at the Railway Siding outside the plant boundary by deploying its own workers, with billing to be done on a per square meter / per cubic meter basis of work actually executed.
The Division Bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) examined the Work Order and the Schedule of Rates and noted that the contractor was not charging any amount towards ‘supply of manpower’ calculated on the number of man-days provided. The billing was entirely based on the civil work actually carried out and measured in cubic meters/square meters, and the Work Order did not specify any fixed number of workers to be deployed for the job.
The Tribunal further observed that the Appellant had recorded all the impugned transactions in its Books of Accounts, from which the Department itself had culled the data to quantify the demand, and that the Appellant being a manufacturer of dutiable goods would have been entitled to Cenvat credit of the Service Tax even if it were payable on RCM basis, leaving no room for any allegation of suppression.
