2013 (8) TMI 334 - AT - Service Tax

Business Auxiliary Services Job Work - appellant has received raw herbs from the clients/customers for grinding of the same - issue involved in the present appeal is whether the appellant is liable to service tax under head of Business Auxiliary Services during the period 10.09.2004 to 15.06.2005 - Held that - The word processing was included in the definition only with effect from 16.06.2005 - it is not legal on part on revenue to demand the service tax on the activity of grinding prior to 16.06.2005 appeal allowed in the favour of the assessee.

Summary

Issues:
1. Whether the appellant is liable to service tax under the head of Business Auxiliary Services during the period from 10.09.2004 to 15.06.2005.

Analysis:
The case involves an appeal by M/s Prakash Pulversing Mills against the Order in Appeal No. 312(DKV) ST/JPR-I/2010 dated 27.08.2010. The appellant, engaged in manufacturing insecticides and pesticides, received raw herbs for job work, specifically 'grinding,' and charged fees for the service. The Department issued a Show Cause Notice demanding service tax on these charges, which was confirmed by the Adjudicating Authority. The appellant appealed to the Commissioner, Central Excise (Appeal), who rejected their appeal, leading to the current appeal before the Tribunal.

The appellant argued that the grinding of herbs constituted processing on behalf of the clients and was not taxable before 16.06.2005. They contended that the Show Cause Notice issued on 17.03.2009 for the period from September 2004 to January 2005 exceeded the time limitation under the Finance Act, 1994, absolving them of liability for interest and penalties. On the other hand, the Revenue argued that grinding for clients fell under the definition of Business Auxiliary Services as per clause (v).

The Tribunal examined whether the appellant was liable for service tax under Business Auxiliary Services from 10.09.2004 to 15.06.2005. It noted that prior to 15.06.2005, the definition of Business Auxiliary Services included the production of goods on behalf of the client. However, from 16.06.2005, the definition was expanded to include the processing of goods as well. The Tribunal found that during the period in question, production on behalf of the client was a taxable service, and processing was explicitly added to the definition from 16.06.2005 onwards.

The Tribunal highlighted that the Show Cause Notice alleged that production of goods included processing and that processing was only added to the statutory provision from June 2005 for clarity. The Commissioner (Appeal) also emphasized that no production could occur without processing. Given that the word 'processing' was incorporated into the definition only from 16.06.2005, the Tribunal concluded that it was not legally permissible for the Revenue to demand service tax on grinding (considered processing) before that date. Consequently, the Tribunal set aside the Order in Appeal and allowed the appeal of the assessee.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the appellant based on the interpretation of the definition of Business Auxiliary Services and the timing of the inclusion of processing within that definition.