2018 (7) TMI 263 - AT - Service Tax

Business Auxiliary Services - job-work - scope of SCN - demand under Management, Maintenance or Repair Service - Held that - The appellants are doing the job of surface grinding of the cylinders supplied by their customers and after completion of the job they are returned to the clients - There is no allegation raised in the SCN that the appellant s activity would fall under Management, Maintenance or Repair Service and the demand is raised in the SCN under the head BAS. The Commissioner (Appeals) has travelled beyond the SCN to confirm the demand under Management, Maintenance or Repair Service - demand cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of service - Business Auxiliary Service or Management, Maintenance, or Repair Service

Analysis:
The case involved a dispute regarding the classification of the appellant's activity as falling under Business Auxiliary Service (BAS) or Management, Maintenance, or Repair Service. The appellants were engaged in job work for customers involving surface grinding of cylinders and other components. The department contended that except for a specific category of customers, the appellants were not eligible for exemption under Notification No. 8/2005 as their activity did not amount to manufacture and should be taxed under BAS. A show cause notice (SCN) was issued proposing service tax under BAS. The original authority confirmed the demand, interest, and penalties, which was upheld by the Commissioner (Appeals) for the normal period, leading the appellants to appeal before the Tribunal.

The appellant's counsel argued that the activity should not be classified under BAS as it constituted manufacturing. They further contended that the activity fell under Management, Maintenance, or Repair Service as it involved reconditioning old cylinders and rolls. The Commissioner (Appeals accepted this argument, departing from the SCN, and classified the activity under Management, Maintenance, or Repair Service. The Tribunal, upon reviewing the case records, noted that the SCN alleged the activity to fall under BAS, as per the definition provided. The original authority had determined that the grinding operations did not result in the manufacture of new products, therefore falling under BAS. However, the Commissioner (Appeals) considered the process as incidental to manufacturing and categorized it under Management, Maintenance, or Repair Service. Since the demand was confirmed under a different service category than alleged in the SCN, the Tribunal found the confirmation unsustainable. Consequently, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the demand under BAS and holding that the activity should be classified under Management, Maintenance, or Repair Service instead. The Commissioner (Appeals) was found to have exceeded the scope of the SCN by confirming the demand under a different service category, leading to the decision in favor of the appellants.