2013 (11) TMI 1454 - AT - Service Tax

Demand of service tax - Business Auxiliary Service - Grinding of wheat into wheat products - Manufacture under Section 2(f) - Held that - Commissioner of Customs & Central Excise Coimbatore Zone as well as Director (CX.1), of Ministry of Finance, Department of Revenue had a view that conversion of wheat into wheat products like maida, suji etc., amounts to manufacture. It is noticed that the demand of service for the subsequent period was set aside by the Commissioner (Appeals), Madurai. Hence, the demand of tax under the service tax, prima facie, is not sustainable. Accordingly, the pre-deposit of tax along with interest and penalty is waived till the disposal of the appeal - Stay granted.

Summary

Issues:
- Whether grinding of wheat into wheat products amounts to manufacture under Section 2 (f) of the Central Excise Act, 1944?
- Whether the demand of service tax on the activity of grinding wheat is sustainable under the category of Business Auxiliary Service?

Analysis:
1. The case involved the issue of whether the grinding of wheat into wheat products constitutes manufacturing under Section 2 (f) of the Central Excise Act, 1944. The Appellate Tribunal considered a Show Cause Notice issued to the applicants, alleging that their activity of grinding wheat did not amount to manufacture and was liable for service tax under the category of Business Auxiliary Service. The tax demand, along with interest and penalty, was confirmed by the adjudicating authority.

2. The Counsel for the applicant argued that grinding wheat into wheat products is considered manufacturing across the country and pointed out discrepancies in the demand raised only by the Madurai Commissionerate. The Counsel presented letters obtained through RTI applications, highlighting conflicting decisions within different Commissionerates. The Additional Commissioner's decision to demand service tax for a specific period was overturned by the Commissioner (Appeal) in Madurai.

3. The Revenue's Authorized Representative supported the adjudicating authority's findings, emphasizing the lack of clarifications from the Board on the issue. The Counsel referred to a case law from the Hon'ble Madras High Court, while the Revenue argued that the case law pertained to sales tax, not excise duty. The Counsel reiterated the relevance of the case law in a letter from the Chief Commissioner of Coimbatore.

4. The Tribunal examined communications from the Chief Commissioner of Customs & Central Excise, Coimbatore Zone, and the Director (CX.1) of the Ministry of Finance, Department of Revenue. These communications acknowledged that the conversion of wheat into wheat products like maida and suji amounts to manufacture. Notably, the Commissioner (Appeals) in Madurai set aside the demand for service tax for a subsequent period, indicating inconsistencies in the application of tax.

5. Considering the views expressed by the Chief Commissioner and the Director, the Tribunal concluded that the demand of service tax on the grinding of wheat into wheat products may not be sustainable. Therefore, the pre-deposit of tax, interest, and penalty was waived until the appeal's final disposal, and a stay application was allowed.

This detailed analysis of the judgment highlights the key arguments, legal interpretations, and conclusions reached by the Appellate Tribunal in resolving the issues related to the demand of service tax on the grinding of wheat into wheat products.