2015 (10) TMI 2287 - AT - Service Tax

Denial of refund claim of cenvat credit - export of services - after sale support service - Business Auxiliary Service - business of processing of chips, the activity which includes circuit designing, testing, validation of such chips, integration of software on chips and support services for its parent company - Held that - The activity would come within the definition of Business Auxiliary Service under Section 65 (19) of the Finance Act.1994. Learned Counsel for the respondent also relied upon the decision of Tribunal in CC, Hyderabad vs Knoah Solutions Pvt.Ltd.- 2010 (6) TMI 452 - CESTAT, BANGALORE . The contention of the Revenue that the activity of processing of chips is a manufacturing process and that it would fall within the definition of manufacture as under section 2(f) of Central Excise Act, 1944 does not find merit at all. - Refund allowed - Decided against Revenue.

Summary

Issues:
Challenge to order of refund of cenvat credit - Whether activity of processing chips constitutes 'manufacture' under Central Excise Act, 1944 or falls under the definition of Business Auxiliary Service as per Section 65 (19) of the Finance Act, 1994.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI pertained to the challenge by the Revenue against the order of refund of cenvat credit amounting to Rs. 21,20,532. The respondent, a 100% EOU engaged in processing chips, applied for the refund citing that the exported services fell under Business Auxiliary Service as defined in Section 65 (19) of the Finance Act, 1994. The Revenue contended that the activity constituted 'manufacture' under section 2(f) of the Central Excise Act, 1944.

The respondent argued that their activity of processing chips involved conceptualization, designing, testing, and validation of chips, along with customer support, falling within the definition of Business Auxiliary Service. The definition of Business Auxiliary Service under Section 65 (19) includes services related to production or processing of goods for the client, which aligns with the respondent's activities. The Tribunal noted that the Revenue's claim that the activity amounted to 'manufacture' lacked merit, as the services provided by the respondent were primarily design-oriented and not manufacturing in nature.

In support of their position, the respondent cited a previous Tribunal decision in CC, Hyderabad vs Knoah Solutions Pvt. Ltd., emphasizing that the processing of chips did not constitute a manufacturing process. The Tribunal found that the activity undertaken by the respondent indeed fell within the ambit of Business Auxiliary Service as defined in the Finance Act, 1994. The authorities also considered a report based on an observation of the respondent's activities on-site, supporting the conclusion that the services provided were not manufacturing but auxiliary in nature.

Ultimately, the Appellate Tribunal upheld the concurrent findings of the adjudicating authority and the appellate authority, dismissing the Revenue's appeal. The judgment highlighted that the respondent's activities aligned with the definition of Business Auxiliary Service, and there was no justification to interfere with the established conclusions regarding the nature of the services provided by the respondent.