2013 (10) TMI 911 - AT - Service Tax

Job Work - Business auxiliary services - Manufacture - Whether the conversion of pipes/tubes by undertaking the processes by the appellants amounts to manufacture or not - Waiver of pre deposit- Held that - for the period subsequent to 16/06/2005, the order of the Commissioner (Appeals) has attained finality since there is no challenge to the order of the Commissioner(Appeals) by both the sides that appellant is liable to pay service tax on the processes undertaken by them on job work basis for others. The challenge to the Commissioner (Appeals) order is only with regard to the period prior to 16/06/2005. Under these circumstances, unless it is shown to us that the processes undertaken by the appellants when job work is done on the pipes are different from the situation when they undertake the processes on their own account, we consider that the Department cannot be said to have a prima facie case - stay granted.

Summary

Issues:
Whether the conversion of tubes by undertaking processes amounts to manufacture for excise duty liability.

Analysis:
The appellants purchase tubes and undertake processes like hardening, tempering, upsetting to make them suitable for drilling industries. The Revenue argues that these processes amount to manufacture, requiring excise duty payment. An order confirmed duty of over Rs.6.77 crores for April 2007 to March 2012, along with penalties and interest. The counsel points out that the Department previously decided these processes do not constitute manufacture. Additionally, post-2005, the Department demanded service tax for similar processes on job work basis. The Commissioner(Appeals) held that the processes do not amount to manufacture, challenging which is before the Tribunal. The counsel argues that since the Department demanded service tax for similar activities, excise duty cannot be levied.

Further Analysis:
The AR contends that the focus should be on whether the processes amount to manufacture, irrespective of service tax collection. Referring to the tariff, he notes that specific categories like casing, tubing, and drill pipes for drilling industries are treated separately, indicating legislative intent. He argues that the processes undertaken by the appellants create products for drilling industries, thus constituting manufacture. The AR highlights a chapter note in Chapter 73 stating that coating is considered manufacture.

Conclusion:
The Tribunal observes that the Commissioner(Appeals) order post-16/06/2005, regarding service tax liability, is final. As there is no challenge to this order, the liability for service tax on job work basis is established. The dispute pertains only to the period pre-16/06/2005. Unless it is demonstrated that processes differ when done on job work basis versus their account, the Department lacks a prima facie case. Consequently, the Tribunal finds a strong prima facie case in favor of the appellant, leading to a waiver of predeposit and stay against recovery during the appeal's pendency.