2015 (12) TMI 678 - AT - Service Tax

Waiver of pre deposit - Demand of service tax - whether retreading of tyers would amount to manufacturer so as to attract the excise liability or the same would amount to providing of service falling under the category of repair and maintenance so as to attract the service tax liability - Held that - Apparently, it seems that in terms of the various decisions of the higher courts such an activity of retreading of old and used tyres would not amount to manufacture. If that be so, the activity would get covered under the service category of repair and maintenance - appellant s turnover is around ₹ 1 crore and it cannot be said that it is financially difficult for them to deposit the amount in question. - Partial stay granted.

Summary

Issues:
1. Whether retreading of tires amounts to manufacturing attracting excise liability or falls under repair and maintenance attracting service tax liability.
2. Whether the demand for service tax is barred by limitation.
3. Financial difficulty of the appellant in depositing the amount in question.

Analysis:
1. The primary issue in this case is determining whether the activity of retreading old and used tires constitutes manufacturing, thus attracting excise liability, or falls under repair and maintenance, thereby attracting service tax liability. The appellant argued that the activity falls under the Central Excise Tariff item No. 4012, supporting the claim of manufacture. However, the respondent contended that the mere mention in the Tariff does not equate to manufacturing as per Section 2(f) of the Central Excise Act. They cited judicial and quasi-judicial decisions stating that repairing old items does not amount to manufacture. The Tribunal also referenced decisions indicating that retreading of tires falls under the service industry, attracting service tax. The issue is deemed contentious and requires further examination based on legal interpretations and precedents.

2. Another crucial aspect is whether the demand for service tax is within the limitation period. The appellant argued that the demand is time-barred, while acknowledging that a portion of the demand may fall within the limitation period. However, exact figures regarding the taxable amount within the limitation period were not provided by the appellant. The respondent estimated the amount to be around Rs. 4 lakhs. The Tribunal recognized the limitation issue and directed the appellant to deposit Rs. 2 lakhs within 30 days, acknowledging the partial limitation defense. The predeposit of the remaining balance was waived, and recovery was stayed during the appeal process.

3. The financial difficulty of the appellant in meeting the required deposit amount was also considered. The appellant claimed financial hardship, while the respondent highlighted the appellant's turnover from the latest balance sheet to argue against financial constraints. Despite the financial plea, the Tribunal balanced the issue of financial capacity with the legal obligations, ultimately ordering a specific deposit amount within a specified timeline, considering the appellant's financial situation and the legal aspects of the case.

In conclusion, the judgment addressed the complex legal issues surrounding the classification of activities for tax purposes, the limitation period for tax demands, and the financial circumstances of the appellant. The decision provided a nuanced approach by considering legal interpretations, precedents, and the practical implications on the appellant's financial obligations.