2009 (1) TMI 70 - AT - Service Tax

Job work of assembling needle threader and 2 other items using the inputs supplied by its principal - appellants plea that the impugned activity came within the definition of manufacture attracting the provisions of Central Excise Act and was not exigible to service tax, was rejected - appellants had paid up the service tax due as well as the interest prior to issue of SCN matter remanded to the Commissioner (Appeals) for disposal on merits without insisting on pre-deposit of the penalties

Summary

Issues:
1. Liability for service tax on job work of assembling items using inputs supplied by principal.
2. Rejection of plea that activity falls under "manufacture" and not liable for service tax.
3. Rejection of appeal by Commissioner (Appeals) due to non-deposit of pre-condition amount.
4. Stay application for adjudged dues and consideration of appeal without pre-deposit of penalties.

Analysis:
1. The appellants undertook job work of assembling items using inputs supplied by their principal, not paying the service tax due initially. The authorities pointed out the liability, leading to the appellants paying the service tax and interest before the show-cause notice. The original authority confirmed the tax demand, interest, and imposed penalties under sections 76 & 78 of the Finance Act, 1994. The appellants argued that the activity fell under "manufacture" and should not attract service tax, but this plea was rejected at various levels.

2. The appellants' plea that the activity amounted to "manufacture" and should be governed by the Central Excise Act, not service tax, was consistently rejected. The lower appellate authority and the Commissioner (Appeals) both dismissed the appeal, with the latter requiring a pre-deposit of the tax amount before considering the appeal. The appellants contended that their claim of having a prima facie case was not adequately considered, and their request to modify the order for a hearing without pre-deposit was also denied without a hearing.

3. The appellants moved a stay application for the adjudged dues, seeking justice. The Tribunal, after hearing both parties, dismissed the stay application and proceeded to consider the appeal itself. It was noted that the service tax and interest had been paid before the show-cause notice, and in such cases, depositing penalty amounts is not typically required to hear an appeal. Therefore, the Tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeals) for disposal on merits without insisting on pre-deposit of penalties.

4. The Tribunal, after dismissing the stay application, decided to consider the appeal without requiring pre-deposit of penalties. The decision was based on the fact that the service tax and interest had already been paid, making it unnecessary to insist on pre-deposit of penalties. The matter was remanded to the Commissioner (Appeals) for further consideration on merits without any pre-deposit requirements.