2014 (8) TMI 555 - AT - Service Tax

Business Auxiliary Service - Job Worker - The nature of process involved is cutting, drilling, pressing, welding etc., as per the drawings of conversion of steel plates into partially finished and fully finished boiler components - Revenue contends it does not amount to manufacture - Held that - It is reported that the raw materials such as MS Plates, MS Pipes and MS Roads were supplied to the applicant by their customers along with Purchase Order, Delivery Challans and drawings and processes were undertaken by the applicant as per the drawing supplied by their customers and the resultant job worked materials were cleared under Delivery Challans and invoices under the name as specified in the Purchase Orders - applicant undertook the job work on behalf of their client M/s. BHEL There is no dispute that the job work materials used in relation or in relation to the manufacturer of the components of boiler. Prima facie , we find that the present case is covered by Exemption Notification No.8/2005-ST, dated 01.03.2005 and also supported by the decision of the Tribunal in the case of M/s. Munish Forge Pvt. Ltd. (2014 (6) TMI 492 - CESTAT NEW DELHI). The case law M/s. Tansi Engineering Works (1996 (8) TMI 256 - CEGAT, MADRAS) is related to the circumstances of the present case. In view of the above discussion, we waive pre-deposit of tax along with interest and penalty till disposal of the appeal and recovery stayed thereof - Stay granted.

Summary

Issues:
1. Whether the process undertaken by the applicant amounts to manufacture under Section 2(f) of the Central Excise Act, 1944?
2. Whether the applicant is liable to pay service tax under "Business Auxiliary Service"?
3. Whether the applicant is eligible for exemption under Service Tax Notification No.8/2005-ST?

Analysis:
1. The case involved the applicant, a job worker of M/s. Bharat Heavy Electricals Ltd. (BHEL), engaged in processes like cutting, drilling, pressing, welding, etc., to convert steel plates into boiler components. The Revenue contended that this process does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. The adjudicating authority upheld the demand of tax, interest, and penalty. However, M/s. BHEL had filed a declaration taking responsibility for discharging excise duty liabilities on the final products, indicating that the job work materials were used in the manufacture of boiler components. The Tribunal found that the process undertaken by the applicant was covered under the exemption notification and waived the pre-deposit of tax, interest, and penalty pending appeal.

2. The Revenue argued that the applicant did not file the required declaration under Notification No.214/86-CE for the entire disputed period. Citing a previous Tribunal decision, the Revenue contended that certain processes like cutting and punching holes may not amount to manufacture. However, a verification report confirmed that the job work materials were supplied by customers, processed as per drawings, and cleared under specified names. The Tribunal noted that the applicant claimed the benefit under Service Tax Notification No.8/2005-ST, which exempts the production of goods using raw materials supplied by the client and returned for further manufacturing. Relying on a Tribunal decision in a similar case, the Tribunal ruled in favor of the applicant, stating that the process undertaken qualifies for exemption under the notification.

3. The applicant relied on a Tribunal decision involving a similar issue where job work activities were considered as manufacturing. The Tribunal found that the job work materials were used in the manufacture of boiler components, aligning with the conditions of the exemption notification. The Tribunal also referred to the decision in M/s. Munish Forge Pvt. Ltd., where activities like cutting, bending, and finishing processes were deemed as manufacturing. Based on these precedents and the facts of the case, the Tribunal allowed the appeal, waived pre-deposit, and stayed recovery pending appeal.