2015 (6) TMI 197 - AT - Service Tax

Demand of service tax on the job work converting black bars into bright bars for various clients for which they receive processing charges - Business Auxiliary Service - Held that - Revenue has not disputed the fact of discharge of excise duty on the very same item manufactured and cleared by the appellant on their account. It is surprising to note that the first appellate authority has not considered this vital submission of the appellant as to when the same goods are manufactured by the same process, how the said process cannot become manufactured out of job working. In our considered view, the self same activity of conversion of black bars into bright bars on their account and clearance of the same on discharging duty as manufactured product cannot become a non-manufactured product when the appellant undertakes jobworking for some other clients. - On bare perusal of the reply to the show-cause notice indicate that there was no response from the department on this query raised by the appellant. The show-cause notice issued in this case is on 13.10.2008 for the period 10.09.2004 to 28.02.2005 which in our view is blatantly time barred and cannot invoke suppression against the appellant. - Decided in favour of assessee.

Summary

Issues:
1. Determination of service tax liability on job work converting black bars into bright bars.
2. Consideration of whether the activity falls under Business Auxiliary Service or manufacturing.
3. Evaluation of the time bar for the show-cause notice issued.

Analysis:
The judgment by the Appellate Tribunal CESTAT MUMBAI pertains to the issue of service tax liability on the job work involving the conversion of black bars into bright bars. The Tribunal noted that the first appellate authority and the adjudicating authority categorized the activity under Business Auxiliary Service, emphasizing that the conversion process did not constitute manufacturing, aligning with a previous ruling by the Hon'ble Apex Court. However, the Tribunal observed that during the relevant period, the appellant was registered with the Central Excise department as a duty paying unit, discharging appropriate duty on the black bars they manufactured and cleared. The Tribunal highlighted that the Revenue did not contest the discharge of excise duty on the same item manufactured by the appellant for their account. The Tribunal reasoned that the conversion process undertaken by the appellant for other clients, while discharging duty on the same product for themselves, should not be considered a non-manufactured product, emphasizing the consistency in the manufacturing process.

Moreover, the Tribunal considered the appellant's inquiry to the department regarding whether their process qualified as "production of goods on behalf of clients" under Business Auxiliary Service or as manufacturing. The lack of response from the department to this inquiry, coupled with the time-barred show-cause notice issued, led the Tribunal to conclude that the notice could not invoke suppression against the appellant. Consequently, the Tribunal held the impugned order as unsustainable and set it aside, allowing the appeal with consequential relief. The judgment highlights the importance of considering the nature of activities in determining tax liabilities and the significance of procedural compliance in tax assessments.