2015 (4) TMI 320 - AT - Service Tax

Demand of service tax - Business Auxiliary Services - Job work - manufacturing of goods were exempted from duty - Held that - first appellate authority has recorded clearly besides, appellants are also converting black bars into bright bars by availing Cenvat Credit on the inputs and clearing finished goods on payment of Central Excise Duty. When the process is accepted as a process of manufacture, it is not correct or logical to conclude that the same process when carried on job work basis does not amount to manufacturing - The submission of the assessee before the first appellate authority has been accepted, as there are not contrary findings and the Revenue s ground of appeal are also not contradicting the said submissions made by the assessee. In the absence of any counter to submissions that the activity undertaken by the appellant/assessee amounts to manufacture and they have discharged the Central Excise duty, the same process if it is undertaken on job work, cannot be held as not manufacturing process. First appellate authority has rightly relied upon the benefit of Notification No. 202/88-CE dated 20/05/1988 which clearly indicates the exemption to certain final products made from the specific products. It is settled law that an exemption from Central Excise duty can be granted only to manufacturer of products. The benefit of Notification No. 202/88-CE is in respect of items manufactured in job work process by the assessee, in this case, it has correctly been held as manufactured products by the first appellate authority. - first appellate authority are correct and the Revenue s appeal has no merits - Decided against Revenue.

Summary

Issues:
1. Whether the conversion of black bars into bright bars amounts to manufacture for the purpose of Central Excise Tariff Act, 1985?
2. Whether the appellant is liable to pay service tax on processing charges recovered for job work under the category of "Business Auxiliary Service"?
3. Whether the first appellate authority erred in setting aside the order-in-original?
4. Whether the benefit of Notification No. 202/88-CE applies to the products manufactured in job work process by the appellant?

Analysis:
1. The appeal concerned the question of whether the conversion of black bars into bright bars by the appellant constitutes manufacturing under the Central Excise Tariff Act, 1985. The appellant was engaged in processes like straightening, peeling, and grinding of steel to convert black bars into bright bars for specific companies. The Hon'ble Supreme Court precedent was cited, indicating that such conversion did not amount to manufacture before 01/03/2005. However, Chapter Note 4 to Chapter 72 recognized the process as manufacturing from 01/03/2005. The lower authority alleged non-payment of service tax on processing charges, but the first appellate authority set aside the order-in-original, emphasizing that the appellant discharged Central Excise duty on the finished goods, indicating a manufacturing process. The Tribunal upheld this reasoning, concluding that the conversion process amounted to manufacture.

2. The issue of liability for service tax on processing charges arose under the category of "Business Auxiliary Service." The lower authority issued a show-cause notice for non-payment of service tax, amounting to Rs. 3,19,315. The learned DR contended that the services rendered by the appellant fell under this category as they processed goods for clients. However, the Tribunal found no fault in the first appellate authority's decision, as the appellant's activities were considered manufacturing, and they had already discharged Central Excise duty on the finished goods. Therefore, the Tribunal rejected the Revenue's appeal, affirming that the appellant was not liable for service tax on the processing charges.

3. The third issue involved whether the first appellate authority erred in setting aside the order-in-original. The learned DR argued that the first appellate authority's reliance on a specific Board Circular was incorrect. However, the Tribunal found no error in the first appellate authority's decision, as it was based on the correct interpretation of the law and the appellant's compliance with Central Excise duty requirements. The Tribunal upheld the first appellate authority's decision, indicating that it was legally sound and correctly set aside the order-in-original.

4. Lastly, the Tribunal considered the applicability of Notification No. 202/88-CE to the products manufactured in job work process by the appellant. The first appellate authority had relied on this notification to grant exemption to certain final products made from specific items. The Tribunal agreed with the first appellate authority's interpretation, stating that the benefit of the notification applied to products manufactured by the appellant in the job work process. This further supported the conclusion that the appellant's activities constituted manufacturing, and the exemption was correctly applied. The Tribunal rejected the appeal, affirming the correctness and legality of the impugned order.

In conclusion, the Tribunal upheld the first appellate authority's decision, dismissing the Revenue's appeal and confirming that the appellant's activities constituted manufacturing, exempting them from liability for service tax on processing charges.