2019 (4) TMI 899 - AT - Service Tax

Job work - intermediate production process - Mega Exemption Notification - Sl. No. 30(c) of N/N. 25/2012 - It appeared to the Department that the job work activity carried out by the appellant is liable to be treated as an exempted service - Held that - Any activity which amounts to manufacture of excisable goods is not subject to levy of service tax under the category of Business Auxiliary Service . After 01.07.2012 the Negative List of services under Section 66D of the Finance Act 1994 specifically stated that any process that is carried out for manufacturing of goods is not subject to levy of service tax. A careful reading of paragraph 30 of Notification No. 25/2012 in this background would show that carrying out an intermediate production process as job work in relation to any goods on which appropriate duty is payable by the principal manufacturer is not taxable. When the process carried out by the appellant amounts to manufacture the very same activity cannot be considered as a service. Merely because the said activity is carried out on an intermediate product Sl. No. 30(c) cannot be applied. Sl. No. 30 states an intermediate production process as job work but does not say that such process will include manufacturing process . When the activity of manufacture is subject to Central Excise Duty the very same activity cannot be subjected to levy of Service Tax. The entire Show Cause Notice is based on a wrong perspective or interpretation of law. The appellant is not engaged in providing any exempted service. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is engaged in the manufacture of dutiable goods as well as the provision of exempted service of job work?
2. Whether the appellant is eligible for CENVAT Credit in respect of inputs and input services used in the manufacture of exempted goods or in providing exempted services?
3. Whether the appellant complied with the provisions contained in Rule 6(3) of the CENVAT Credit Rules, 2004?
4. Whether the demand raised on the appellant is legal and proper based on the interpretation of relevant notifications and laws?

Issue 1:
The appellant was engaged in the manufacture of Interior and Exterior Parts of Passenger Cars and other products falling under specific Chapter Headings. The Department contended that the job work activity carried out by the appellant is liable to be treated as an exempted service. The Department concluded that the appellant was involved in both manufacturing dutiable goods and providing exempted job work services, using common input services. As per Rule 6(1) of the CENVAT Credit Rules, the appellant would not be eligible for CENVAT Credit in such cases unless separate accounts were maintained or credit was reversed.

Issue 2:
The appellant did not comply with the provisions contained in Rule 6(3) of the CENVAT Credit Rules, 2004. A Show Cause Notice was issued proposing to recover the irregularly availed credit along with interest and imposing penalties. The Original Authority confirmed the demand, and the Commissioner (Appeals) upheld the decision. The appellant argued that the activity carried out by them was manufacturing of intermediate products required for the manufacture of excisable goods, and the demand raised was based on a misconception of law.

Issue 3:
The appellant contended that the activity of manufacturing intermediate products for the principal manufacturer did not amount to an exempted service as interpreted by the Department. The appellant argued that the process carried out by them amounted to manufacturing, and the emergence of a new excisable product after their activity was not disputed. The Tribunal found that the Department's interpretation was erroneous, and the appellant was not engaged in providing any exempted service.

Issue 4:
The Tribunal analyzed the relevant notifications and laws, including Sl. No. 30(c) of Notification No. 25/2012 and the definition of 'Business Auxiliary Service'. The Tribunal concluded that the appellant's activity, which amounted to manufacturing, could not be considered an exempted service. The demand raised by the Department was deemed unsustainable, and the impugned order was set aside, allowing the appeal with consequential reliefs as per law.

This detailed analysis of the judgment highlights the key issues involved and the Tribunal's decision on each issue, providing a comprehensive understanding of the legal aspects and interpretations involved in the case.