2009 (1) TMI 14 - AT - Service Tax

Activity of fabrication of railway structures & ladders for towers, on the material supplied by principal - Such activity amounts to manufacture of excisable goods - Business Auxiliary Service , as defined in Finance Act, specifically excludes the activity that amount to manufacture within the meaning of section 2(f) of the Central Excise Act, from the ambit of the service tax and thus the activity carried out by the appellants does not attract any service tax revenues appeal is rejected

Issues:
1. Appeal against the order-in-appeal dated 24.9.2007 passed by the Commissioner (Appeals), Customs & Central Excise, Raipur-II.
2. Tax demand and penalty imposition for the activity of fabrication of railway structures & ladders for towers under Business Auxiliary Service category.
3. Confirmation of demand by Adjudicating Authority, setting aside of the adjudication order by the Commissioner (Appeals).
4. Verification report confirming the activity as manufacture under notification No. 214/86-CE.
5. Exclusion of manufacturing activity from service tax under section 65(19) of the Finance Act, 1994.
6. Rejection of Revenue's appeal based on the Commissioner (Appeals) order.
7. Criticism of Revenue's appeal in a case involving a minor amount.

Analysis:
1. The appeal was filed against the order-in-appeal dated 24.9.2007 passed by the Commissioner (Appeals), Customs & Central Excise, Raipur-II. The respondent was engaged in the fabrication of railway structures & ladders for towers using materials supplied by another company. The Adjudicating Authority had confirmed the tax demand and imposed a penalty, which was set aside by the Commissioner (Appeals).

2. The Commissioner (Appeals) based the decision on a verification report confirming that the activity undertaken by the respondent amounted to manufacturing under notification No. 214/86-CE. The report indicated that the supplier of raw materials had paid the duty on the final product, and the activity was considered as job work. The Commissioner (Appeals) highlighted that the activity fell under the exclusion clause of service tax as it constituted manufacturing within the meaning of the Central Excise Act, 1944.

3. The Tribunal found no dispute with the verification report and upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeal. The Tribunal emphasized that the activity in question did not attract service tax due to its classification as manufacturing, as per the legal provisions cited by the Commissioner (Appeals).

4. The Tribunal criticized the Revenue for appealing a case involving a minor amount, stating that it was an improper exercise of power and an unnecessary burden on the assessee. This criticism highlighted the need for a balanced approach in challenging decisions, especially in cases with relatively insignificant amounts involved.

In conclusion, the judgment focused on the proper application of legal provisions regarding the classification of activities as manufacturing and the exclusion of such activities from service tax. The Tribunal upheld the Commissioner (Appeals) decision based on the verification report and criticized the Revenue for appealing a case with a minor amount, emphasizing the importance of exercising discretion in such matters.

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