Civil Work Contract Not Manpower Supply Service Merely Because Contractor Deploys Own Workers: CESTAT Kolkata

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata has held that civil work billed according to the work performed could not be treated as “Manpower Service” where the contractor's billing was not based on the number of workers or man-days deployed.

The tribunal found that the consideration was linked to the civil work carried out at the railway siding, rather than the manpower deployed.

“From the above Work Order, we find that the service provider is not charging any amount towards 'Supply of Manpower' on the number of man days provided by him. It is based on the civil work carried out and the billing is done towards per cubic meter of work done. As a matter of fact, there is no mention about any number of workers deployed for this work. Therefore, based on such factual documentary evidence, the lower authorities have considered the service as 'Manpower Service'. Therefore, on merits, we set aside the demand.,” the bench of Judicial Member R. Muralidhar and Technical Member K. Anpazhakan observed.

The dispute concerned a show cause notice demanding service tax of ₹44,81,113 from Dalmia Cement (Bharat) Ltd. The adjudicating authority dropped ₹40,57,307 of the demand but confirmed the remaining ₹4,23,806. It held that the services provided by Shree Durga Enterprises were manpower supply services and that Dalmia Cement was required to discharge service tax under the reverse charge mechanism.

Dalmia Cement challenged the order before the Commissioner (Appeals), but the appeal was dismissed. Before the tribunal, the company argued that Shree Durga Enterprises had undertaken civil work at the railway siding by deploying its own workers.

It relied on the work order issued to the contractor. The work order required Shree Durga Enterprises to undertake civil work and provided rates per square metre and cubic metre of work completed.

The tribunal examined the work order and found that the contractor was not charging for manpower based on man-days. Instead, the billing was linked to the civil work carried out. The work order also made no mention of the number of workers deployed for the work.

On that basis, the tribunal set aside the demand on merits.

The tribunal also found the demand to be barred by limitation. It noted that the transactions had been recorded in Dalmia Cement's books of accounts. The same records had been used to quantify the demand.

It therefore held that no case of suppression could be made out against the company.

The bench further observed that Dalmia Cement was a manufacturer of dutiable goods. Even if the Revenue's view that the service was manpower service were accepted, the service tax paid under the reverse charge mechanism would have been eligible as Cenvat credit.

“Hence, no case of suppression can be made out against the appellant. Therefore, we set aside the confirmed demand even on account of time bar,” the tribunal ruled.

The tribunal accordingly allowed the appeal. It granted consequential relief, if any, as per law.

For Appellant: Payal Bharwani, Advocate

For Respondent: B. Sanfui, Authorized Representative