2016 (1) TMI 620 - AT - Service Tax

Job work - Nature of activity - Manufacturing activity or Mere supply of labour services - Converting Aluminum Ingots to Aluminum casting - The charges for the job work are based on the quantum of production and not against supply of manpower. - Held that - The activity remains as production on behalf of the client in the factory of the client. In this fact though the appellant was deputing the manpower but services which carried out were job work in the client s factory, the said activity amounts to manufacture, hence, does not fall under category of Manpower Recruitment Services. Since activity of the appellant amounting to manufacture of the goods, even it is not covered under Business Auxiliary Services, as Manufacturing activity stands excluded in the definition to Business Auxiliary Services. Even if it is considered as taxable activity, the same is exempted under Notification No. 8/2005-ST dated 1/3/2005. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Appeal against Order-in-Appeal upholding Order-in-Original for Service Tax liability on job work.
2. Whether job work converting Aluminum Ingots to Aluminum Castings amounts to manufacture.
3. Applicability of Service Tax on job work services provided.
4. Exemption under Notification No. 8/2005-ST for job work services.

Analysis:

1. The appeal was filed against the Order-in-Appeal upholding the Order-in-Original for Service Tax liability on job work provided by the appellant. The Commissioner (Appeals) had rejected the appeal, leading to the appellant approaching the Tribunal.

2. The main contention revolved around whether the job work of converting Aluminum Ingots to Aluminum Castings constituted manufacturing activity. The Revenue argued that the appellant's services fell under 'Manpower Recruitment Agency Services', making them liable for Service Tax for the period 2007-08 and 2008-09. The Adjudicating Authority had confirmed the demand and imposed a penalty.

3. The appellant, through their counsel, argued that they provided job work services based on the quantum of production, not as a manpower recruitment agency. They contended that the activity amounted to manufacturing, excluded from Service Tax under 'Business Auxiliary Services'. Additionally, they claimed exemption under Notification No. 8/2005-ST. The appellant cited the judgment in the case of Hemant V. Deshmukh vs. Commissioner of C.Ex, Goa (2014(35) STR 602 (Tri. Mumbai)] to support their arguments.

4. After considering both sides' submissions, the Tribunal found that the appellant's job work was based on production quantity and not manpower supply. The services provided were considered as manufacturing activity on behalf of the client, exempt from Service Tax. The Tribunal agreed with the appellant's counsel that even if the activity was taxable, it was exempted under Notification No. 8/2005-ST. The judgment cited by the appellant's counsel was deemed applicable to the case. Consequently, the Tribunal set aside the impugned order and allowed the appeal with any consequential relief as per the law.