2018 (12) TMI 615 - AT - Service Tax

Business Auxiliary Service - job work activities for polishing the utensils on behalf of the other manufacturers - extended period of limitation - Held that - Since the appellant is a job worker and is not engaged in the manufacture of the excisable goods in its factory, the activity of job work should be considered as a service, leviable to Service Tax under the category of Business Auxiliary Service - In view of the Circular dated 15.07.2011, there was ambiguity in understanding the position of law and accordingly, the appellant did not pay the Service Tax liability for the job work activity undertaken by it. Extended period of limitation - Held that - Since the issue involved genuine interpretation of the statutory provision, the charges of suppression, wilful misstatement, fraud etc. cannot be levelled, for initiation of show cause proceedings beyond the normal period of limitation - admittedly since the SCN was issued beyond the normal period the same, this will not stand for judicial scrutiny. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of job work activities as a service under "Business Auxiliary Service" for Service Tax liability.
Applicability of CBEC Circular dated 15.07.2011 on the manufacturing and service distinction.
Validity of demand confirmed against the appellant due to limitation period exceeding under Section 73(1) of the Finance Act, 1994.

Analysis:
The appellant, engaged in manufacturing stainless utensils and undertaking job work for polishing, challenged the demand confirmed by the Commissioner (Appeals) classifying the polishing activity as a service under "Business Auxiliary Service." The appellant argued that polishing is essential for making utensils marketable and should be considered a manufacturing activity as per the CBEC Circular dated 15.07.2011, not a service. The Department, represented by the Revenue, supported the findings of the impugned order.

Upon review, the Tribunal acknowledged that the utensils require polishing to be marketable, but as the appellant is a job worker and not the principal manufacturer, the activity should be classified as a service, subject to Service Tax under "Business Auxiliary Service." The Tribunal noted the ambiguity in interpreting the law, as clarified by the CBEC Circular, and ruled in favor of the appellant, setting aside the demand due to the initiation of show cause proceedings beyond the normal limitation period specified in Section 73(1) of the Finance Act, 1994. The Tribunal emphasized that genuine interpretation issues precluded charges of suppression or fraud, leading to the appeal being allowed in favor of the appellant.

In conclusion, the Tribunal's decision centered on the classification of job work activities as a service under "Business Auxiliary Service" for Service Tax liability, influenced by the interpretation provided in the CBEC Circular dated 15.07.2011. The ruling also highlighted the importance of limitation periods in initiating demand proceedings, especially in cases involving genuine interpretation issues, ultimately resulting in the appeal being allowed in favor of the appellant.