2011 (7) TMI 948 - AT - Service Tax

Waiver of pre-deposit - Business Auxiliary Service - Held that manufacture implies the change but every change is not manufacture. The manufacture is excluded from definition of Business Auxiliary Services and the exclusion does not say that the final product should be excisable - Decided in favor of the assessee

Summary

Issues:
1. Whether the demand of Service Tax on the applicant is justified based on the agreement with M/s. Bayers Pharmaceuticals Pvt. Ltd.
2. Whether the applicant's activity as a manufacturer falls under the category of Business Auxiliary Service.
3. Whether the applicant is liable to pay Service Tax, interest, and penalty under various provisions of the Finance Act, 1994.

Analysis:

1. The applicant filed for waiver of pre-deposit of Service Tax, interest, and penalty totaling Rs. 5,13,822/- imposed due to an agreement with M/s. Bayers Pharmaceuticals Pvt. Ltd. The agreement involved producing alcoholic preparation "Bayer Tonic II," categorized as Business Auxiliary Service under the Finance Act, 1994. The demand for Service Tax was confirmed based on this agreement.

2. The applicant contended that as a manufacturer, they are excluded from Business Auxiliary Services. The argument was supported by the interpretation of the term "manufacture," which includes any process related to the completion of a manufactured product. Citing relevant legal precedents, it was argued that every change in a product does not amount to manufacture, and the exclusion from Business Auxiliary Services pertains only to manufacturing activities.

3. The Tribunal examined the definition of "manufacture" and the scope of exclusions from Business Auxiliary Services. Referring to a Supreme Court decision, it was established that manufacture involves bringing a new substance into existence through processes that change the original commodity. Based on this analysis, the Tribunal found that the applicant had a prima facie case for a complete waiver of pre-deposit of Service Tax, interest, and penalty. Consequently, the Tribunal allowed the stay petition, waiving the Service Tax, interest, and penalty during the appeal's pendency.