2013 (12) TMI 104 - AT - Service Tax

Service Tax demand - Penalty under Section 78 - Notification No. 8/2005-ST dated-01/03/2005 - Business Auxiliary Services - Held that - It is the asserted case of the petitioner; and the assertation is not controverted by Revenue that the petitioner was a mere provider of anti-corrosion treatment. If the petitioner was providing the anti-corrosion treatment for its own material, there would be no question of a taxable service having been provided, since service to oneself is not a taxable service. The fundamental premise of the proceedings is that the petitioner was providing the anti-corrosion service to another by way of BAS. The goods processed by the petitioner are received from, processed and then handed over to the client another and the later manufactures excisable goods. The benefits of Notification No. 8/2005-ST would therefore, clearly and squarely apply - Prima facie case in favour of the petitioner - Stay granted.

Issues:
1. Service Tax demand confirmation by the Commissioner of Service Tax, Kolkata.
2. Rejection of immunity claim based on Notification No. 8/2005-ST.
3. Interpretation and application of Notification No. 8/2005-ST regarding exemption conditions.
4. Misconception in the adjudicating authority's understanding of the Notification requirements.
5. Assertion of being a mere provider of anti-corrosion treatment and its impact on taxable service provision.

Analysis:
1. The judgment addresses the confirmation of a Service Tax demand amounting to Rs.52,82,536/- along with interest and penalty under Section 78 of the Act by the Commissioner of Service Tax, Kolkata. The proceedings were initiated due to the provision of Business Auxiliary Services (BAS) by the petitioner and the failure to remit tax within the due date after filing Returns.

2. The petitioner claimed immunity to the tax liability based on Notification No. 8/2005-ST dated-01/03/2005, which was rejected by the adjudicating authority. The key contention revolved around the application of this specific notification.

3. Notification 8/2005-ST grants exemption from Service Tax under certain conditions, including the production of goods using raw materials supplied by clients, with the produced goods returned to clients for use or in manufacturing excisable goods. The explanation to the Notification defines "production of goods" and emphasizes that it should not amount to manufacture under the Central Excise Act, 1944.

4. The adjudicating authority's rejection of the petitioner's claim for Notification benefits was based on a misconception of the notification requirements. The authority erroneously stated that the goods produced should "amount to manufacture" instead of the correct condition that they "should not amount to manufacture." Additionally, the authority's reasoning regarding the lack of receiving or returning raw materials to the client was deemed a misconception by the appellate tribunal.

5. The petitioner's assertion of being a mere provider of anti-corrosion treatment, not providing the service to oneself but to another party, was crucial. As the goods processed by the petitioner were received from, processed, and then handed over to the client for manufacturing excisable goods, the benefits of Notification No. 8/2005-ST were deemed applicable. The tribunal found a strong case in favor of the petitioner and waived the pre-deposit requirement while staying further proceedings pending the appeal's disposal.

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