2014 (2) TMI 196 - AT - Service Tax

Waiver of pre deposit - Job work - business auxiliary service - manufacturing bulk drugs on job work basis. - Held that - the invoices which has been raised by the appellant on the principle, talks about the receipt of compensation charges and processing of the goods on behalf of the client, and they were under the impression that the activity falls under the category of Business Auxiliary Service but the activity in which they are engaged, since amount to manufacture, they are exempted from the Central Excise duty. - prima-facie appellant has made out a case for the waiver of pre-deposit of amounts involved - Stay granted.

Summary

Issues:
Waiver of pre-deposit of service tax, interest, and penalty under Section 78 of the Finance Act, 1994 for manufacturing bulk drugs on job work basis.

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Analysis:

Issue 1: Nature of Transaction
The appellant operated a factory manufacturing bulk drugs and undertook job work for a principle manufacturer, receiving a lump-sum compensation. The department alleged the activity fell under Renting of Immovable Property Services. However, upon reviewing the agreement and invoices, it was evident that the arrangement was for job work, not leasing or letting of property. The invoices indicated compensation for processing goods on behalf of the client, falling under Business Auxiliary Service. The tribunal concluded that the activity amounted to manufacturing, exempting it from Central Excise duty.

Issue 2: Prima Facie Case
The tribunal found that the appellant had a strong case both on merits and limitation. It was observed that the appellant's interpretation of the agreement as job work arrangement, supported by the nature of invoices, was reasonable. Consequently, the tribunal deemed that the appellant had made a compelling case for the waiver of pre-deposit of the disputed amounts.

Conclusion
Considering the nature of the transaction and the appellant's prima facie strong case, the tribunal allowed the application for the waiver of pre-deposit of the confirmed service tax, interest, and penalty amounts. The recovery of the said amounts was stayed pending the disposal of the appeal. This judgment highlights the importance of accurately characterizing transactions to determine the applicable tax liabilities and exemptions under relevant laws.

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This comprehensive analysis of the judgment addresses the issues involved, the tribunal's findings, and the ultimate decision regarding the waiver of pre-deposit in the context of manufacturing bulk drugs on a job work basis.