2015 (12) TMI 599 - AT - Service Tax

Waiver of pre deposit - Business Auxiliary Service - Held that - Proceedings were initiated by show cause notices dated 24/01/2012 and 26/04/2012 covering the block period 2007-08 to November 2011 proposing to levy service tax for the taxable renting of immovable property service defined in Section 65(90a) read with Section 65(105)(zzzz) of the Finance Act, 1994. The petitioner contended in response that the service provided by the Petitioner would fall more appropriately, but generically within Clause (v) of Section 65(19)(i) i.e. as Business Auxiliary Service (BAS), namely production or processing of goods for and on behalf of the client (Aurobindo Pharma Ltd.). The service provided by the Petitioner is clearly classifiable as BAS and in terms of clause (v) of Section 65(19) it would not be a taxable service since the activity of the Petitioner amounts to manufacture of excisable goods and would therefore be outside the purview of the taxable service. - In the light of our analysis of a substantively similar service in the decision in Jubilant Industries supra, we find a strong prima facie case in favour of the Petitioner and therefore we grant waiver in full of pre-deposit and stay all further proceedings for recovery of the adjudicated liability, pending disposal of the appeal - Stay granted.

Summary

Issues:
1. Classification of service provided by the Petitioner under loan-licence agreements with a pharmaceutical products manufacturer.
2. Applicability of service tax on the service provided by the Petitioner.
3. Comparison with a similar case involving Business Support Services.
4. Granting of waiver and stay on recovery proceedings.

Analysis:

1. The Petitioner entered into loan-licence agreements with a pharmaceutical products manufacturer for job-work basis manufacturing of bulk medicines and other products. The agreements contained covenants regarding conversion facilities, conversion charges, monthly payments, and reimbursement of expenses incurred by the Petitioner.

2. Show cause notices were issued proposing service tax for 'renting of immovable property' service. The Petitioner argued that the service provided fell under 'Business Auxiliary Service' (BAS) as it involved production or processing of goods for the client. The Petitioner contended that since the activity amounted to manufacturing excisable goods, it should be outside the purview of taxable service.

3. The adjudicating authority classified the service as renting of immovable property based on the lease agreement between the Petitioner and the pharmaceutical manufacturer. However, a similar case involving Business Support Services was decided differently by the Tribunal. In that case, the service provider's activity was considered manufacturing and not taxable under Section 65(19)(v).

4. Considering the decision in the similar case, the Tribunal found a strong prima facie case in favor of the Petitioner. As a result, the Tribunal granted a waiver of pre-deposit and stayed further proceedings for recovery of the adjudicated liability pending the appeal's disposal. The stay application was disposed of accordingly.