2010 (9) TMI 622 - AT - Service Tax

CENVAT credit on service tax - Job work - Business Auxiliary Services - The respondent to take the work of crimping and soldering done by such contract labourers and on that job work, they paid service tax to the labour contractor and availed CENVAT credit - It is found that the activity of the process of crimping and soldering carried out by the respondent on the inputs like PVC coated GI wires, Aluminum Filled Shells, Fuse heads etc. supplied by its principal results in to manufacture of distinct and new product namely detonator and therefore it does not fall under the purview of Business Auxiliary Services And once it does not fall under the BAS, availing of exemption under Notification No. 8/05 does not arise - Hence, the decision of Sterlite Industries (I) Ltd. is squarely applicable to the facts of this case - Hence, do not find infirmity in the impugned order and the same is upheld - Decided in favour of assessee.

Summary

Issues:
- Availing CENVAT credit on job work without intimating the department.
- Denial of CENVAT credit for violation of Rule 6 of CENVAT Credit Rules, 2004.
- Appeal against the Commissioner (Appeals) decision regarding revenue neutrality.
- Interpretation of the decision in Sterlite Industries (I) Ltd. v. Commissioner of Central Excise, Pune.
- Application of exemption Notification No. 8/05 to the case.
- Determination of whether the activity constitutes Business Auxiliary Services.

Analysis:

1. The respondent availed CENVAT credit on service tax paid to the labour contractor for job work involving crimping and soldering. The Revenue denied the credit, alleging violation of Rule 6 of CENVAT Credit Rules, 2004, due to not intimating the department about the job work. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) set aside the order, leading to the Revenue's appeal.

2. The learned DR contended that the case did not involve revenue neutrality, citing the decision in Sterlite Industries (I) Ltd. v. Commissioner of Central Excise, Pune. He argued that the situation in the present case differed from the precedents referenced. The Tribunal's observation in Jay Yuhshin Ltd. v. CCE, New Delhi, emphasized the need to establish revenue neutrality based on the specific facts of each case, not just the availability of an alternate scheme.

3. Conversely, the respondent's advocate argued that the goods were not removed under any exemption Notification but through job work challan as per Rule 4(5)(a) of CENVAT Credit Rules, 2004. Referring to the decision in Kinetic Engg. Ltd. v. Commissioner of Central Excise, Pune-III, it was asserted that the inputs used in manufacturing final products after job work should not be considered for exempted goods.

4. The presiding judge analyzed both arguments, concluding that the Revenue's contentions regarding revenue neutrality and the applicability of Sterlite Industries (I) Ltd. were not convincing. It was established that the activity of crimping and soldering by the respondent resulted in the manufacture of a distinct product, detonator, not falling under Business Auxiliary Services. Consequently, the availing of exemption under Notification No. 8/05 was deemed unnecessary, and the impugned order was upheld, rejecting the Revenue's appeal.