2011 (9) TMI 791 - AT - Service Tax

Waiver of pre-deposit and stay of recovery in respect of Service Tax of Rs. 10,39,720/- and penalties - It is submitted that, from the stage at which the blank is obtained through grinding of the worn-out die on the aforesaid machine, the process is analogous to conversion of incomplete or unfinished into complete/finished article and hence it should amount to manufacture - It is contended that, where the activity undertaken by the appellant amounted to manufacture, it would not be exigible to Service Tax under any head whatsoever - the appellant is directed to pre-deposit an amount of Rs. 3,00,000

Summary

Issues:
Waiver of pre-deposit and stay of recovery in respect of Service Tax and penalties for the period 2004-05 to 2008-09.

Analysis:

1. Waiver of Pre-deposit and Stay of Recovery:
The appellant sought waiver of pre-deposit and stay of recovery regarding Service Tax of Rs. 10,39,720/- and penalties for the period 2004-05 to 2008-09. The impugned demand pertained to "Management, Maintenance or Repair Services" for rethreading/regrinding of old damaged and worn-out thread rolling dies. The appellant claimed that the activity of rethreading on a special machine constituted 'manufacture' as per Note 6 to Section XVI of the Central Excise Tariff Act. The appellant argued that the process involved converting incomplete articles into complete/finished articles, thus exempting it from Service Tax.

2. Applicability of Section Note and Prima Facie Case:
The appellant's case primarily relied on Section Note 6 of the Central Excise Tariff Act to support the contention that the activity amounted to 'manufacture' and should not be subject to Service Tax. However, upon closer examination, the Tribunal found that the Section Note was not squarely applicable to the appellant's activity during the material period. The Tribunal did not find a prima facie case against the impugned demand based on the Section Note. Despite this, considering the appellant's status as a Small Scale Industry (SSI) unit and financial hardships, the Tribunal ordered a partial pre-deposit of Rs. 3,00,000/- within six weeks.

In conclusion, the Appellate Tribunal CESTAT, Bangalore, in the case involving waiver of pre-deposit and stay of recovery for Service Tax and penalties, ruled that the appellant's reliance on Section Note 6 of the Central Excise Tariff Act was not convincing. While the Tribunal did not find a prima facie case against the demand, it acknowledged the appellant's SSI status and financial difficulties by ordering a partial pre-deposit.