2018 (10) TMI 556 - AT - Service Tax

Nature of activity - Manufacture or service? - Business Auxiliary Service or not? - machining and grinding of castings purchased. Whether the activity of doing job work of the castings namely, Elbow, Cocks and Valves, after subjected to grinding and machining, amount to manufacture or not? Held that - We have gone through the Chapter notes pertaining to Tariff Sub-heading No. 74199100 of the Central Tariff Act, 1985 which pertains to cast, moulded, stamped or not forged, further worked and the conversion of the same into finished goods find it place at Tariff Sub-heading No. 8481 80 20 which is evident from the table as extracted above. It is therefore, evident that when the goods are falling into the two different categories within the Central Excise Tariff Act, the same will mean that amount to manufacture. It is also clear from the Section 5 (a) of the Section 15 of the Central Excise, Tariff Act. The activities undertaken by the Appellant fall within the ambit of manufacturing and thus beyond the purview of the Business Auxiliary Service - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of activities as manufacturing or Business Auxiliary Service under the Finance Act, 1994.

Analysis:
The judgment by the Appellate Tribunal CESTAT KOLKATA involved a dispute regarding the classification of activities undertaken by the appellant as either manufacturing or falling under the purview of Business Auxiliary Service as defined under the Finance Act, 1994. The appellant was engaged in two types of activities, namely the production of castings out of brass scrap purchased from the market, and the processing of materials received from customers through grinding and machining. The impugned order upheld by the Commissioner (Appeal) confirmed the demand of Service Tax, interest, and penalty under the Finance Act, 1994, stating that the activities fell under Business Auxiliary Service, not manufacturing as claimed by the appellant.

The appellant argued that the activities undertaken, particularly in the second category of goods, should be considered as manufacturing based on the provisions of the Central Excise Tariff Act. Reference was made to Section Note 5(a) of Section 15 of the Central Excise Tariff Act, which classifies alloys based on the metal predominating by weight. It was highlighted that brass, being an alloy of copper and zinc where copper predominates by weight over zinc, is classified under Chapter 74 of the Central Excise Tariff Act.

Further, specific tariff sub-headings were presented to demonstrate the classification of raw cast cocks & valves of brass and their conversion into finished goods. The appellant contended that the activities undertaken amount to manufacturing, supported by the definition of Business Auxiliary Service under Section 65(19) of the Finance Act, 1994, which excludes activities amounting to manufacture as per Section 2(f) of the Central Excise Act.

The Appellate Tribunal, after considering the submissions and examining the relevant tariff provisions, concluded that the activities carried out by the appellant indeed fell within the scope of manufacturing and not under the Business Auxiliary Service. The Tribunal noted that the goods falling into different categories within the Central Excise Tariff Act indicated manufacturing activities, as per Section 5(a) of Section 15 of the Central Excise Tariff Act. Consequently, the impugned order demanding Service Tax, interest, and penalty was set aside, and the appeal filed by the appellant was allowed.