2018 (5) TMI 469 - AT - Central Excise

Area based exemption - N/N. 50/2003-CE dt. 10.06.2003 - demand under Business Auxiliary Service - benefit of exemption notification was denied to the appellants on the premise that they have not filed any declaration under the N/N. 50/2003 as required and the demand of Service Tax was confirmed under the category of Business Auxiliary Service as job work activity, they are liable to Service Tax. Whether the demand can be confirmed under Business Auxiliary Service for the period prior to 16.06.2005 under the category of Business Auxiliary Service for the activity of bullet proofing of vehicle or not? - Held that - Admittedly, the appellants are not producing the goods on behalf of the client, moreover, the appellants are engaged in the activity on the goods produced by their clients and further processing for the bullet proofing of those vehicles - Admittedly, for the period, prior to 16.06.2005, the word processing of goods was missing, in that circumstances, the demand of Service Tax for the period prior to 16.06.2005 is not sustainable - in this case the period involved is prior to 16.06.2005, therefore, the demand of Service Tax on account of Business Auxiliary Service is set aside - demand set aside. Whether the appellant is entitle to benefit of exemption N/N. 50/2003-CE or not? - Difference of opinion - majority order - Held that - the appellant has got an acknowledgment of having a letter addressed to Assistant Commissioner intimating availment of the said Notification No. 50/2003 and a copy of which having acknowledged by Sector Officer and that the Sector Officer is part and parcel of establishment of Assistant Commissioner, therefore, as held in various pronouncements that a communication submitted to any authority under establishment was to be treated as submitted to the head of the office. The letter acknowledged by Sector Officer is an intimation submitted to the Assistant Commissioner. If that is not held so than in further each and every acknowledgment is to be given by Assistant Commissioner himself and the same will not be practical and possible - Therefore, the appellant had filed intimation that they would be availing benefit of notification no. 50/2003 with the Assistant Commissioner - appellant entitled for benefit of notification. In view of the majority decision the appeals are allowed

Summary

Issues Involved:
1. Whether the demand can be confirmed under Business Auxiliary Service for the period prior to 16.06.2005 for the activity of bulletproofing of vehicles.
2. Whether the appellant is entitled to the benefit of exemption under Notification No. 50/2003-CE.

Issue-wise Detailed Analysis:

1. Demand under Business Auxiliary Service:
The appellants were engaged in the activity of bulletproofing vehicles. The relevant clause of Section 65(19) of the Finance Act, 1994, was amended on 16.06.2005. Prior to this amendment, the clause read "Production of goods on behalf of the client," which did not include processing activities. Since the appellants undertook processing rather than production, the demand for Service Tax under Business Auxiliary Service for the period prior to 16.06.2005 was deemed unsustainable. Consequently, the demand of Service Tax on account of Business Auxiliary Service for the period before the amendment was set aside.

2. Entitlement to Exemption under Notification No. 50/2003-CE:
The appellants claimed exemption under Notification No. 50/2003-CE, which required manufacturers to exercise their option in writing before the first clearance and to provide specific details to the jurisdictional Deputy Commissioner or Assistant Commissioner of Central Excise. The appellants asserted that they had filed the necessary declaration on 06.10.2003, which was confirmed by a report from the jurisdictional central excise authorities. However, the Adjudicating Authority denied the exemption, arguing that the appellants had not proven substantial expansion and had not filed the required declaration with the District Industries Center.

The appellants contended that the notification did not require intimation to the District Industries Center and that any discrepancies should have been addressed by the Revenue. They argued that the show cause notice was time-barred since the facts were already known to the Department.

The Tribunal examined the documents and found that the appellants had complied with the notification's conditions. The declaration dated 06.10.2003 was found on record, and any deficiencies should have been addressed by the Revenue. The Tribunal noted that the reliance on the District Industries Center report was misplaced, as the notification did not require such a declaration. Consequently, the benefit of the exemption Notification No. 50/2003-CE was granted to the appellants.

Separate Judgment by Member (Technical):
The Member (Technical) disagreed with the majority opinion regarding the exemption under Notification No. 50/2003-CE. He emphasized that the declaration was mandatory to prevent misuse of the notification. He found no credible evidence that the declaration was submitted to the Assistant Commissioner and relied on the report from the District Industry Centre, which indicated that no substantial expansion was applied for by the appellants. He also upheld the penalties imposed on the appellants for suppression of facts.

Majority Order:
The majority decision favored the appellants, allowing the appeals and granting the benefit of the exemption Notification No. 50/2003-CE. The Tribunal concluded that the appellants had filed the necessary declaration and complied with the notification's conditions. The appeals were allowed with consequential relief.