2019 (11) TMI 171 - AT - Central Excise

Nature of activity - manufacture or service? - Activity amounting to manufacture or not - respondents were receiving certain goods for job work against the returnable challans and after doing job work, the same were sent been to the principal manufacturer - tax discharged under the head Business Auxiliary Services - Revenue entertained a view that the activity undertaken by the respondents amounted to manufacture and as such they should have paid duty of excise instead of payment of service tax - time limitation. HELD THAT - As against the finding of Commissioner (Appeals) Revenue has not produced any evidence to show that the non-payment of duty of excise by the respondents was on account of any mala fide. Admittedly, he was registered with the Service Tax Department and was discharging tax liability accordingly. The fact of registration and payment of service tax was in the knowledge of the Revenue and as such it cannot be said that the appellant suppressed any facts with intent to evade payment of duty. The benefit of extended period stands rightly allowed by Commissioner (Appeals). No infirmity is found in the said order of the Appellate Authority - appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the activity undertaken by the respondents amounts to manufacture, requiring payment of excise duty instead of service tax.
2. Whether the extended period of limitation is applicable for the demand of excise duty.
3. Whether the seizure of goods is sustainable without evidence of non-payment of duty.

Analysis:

1. The respondents were receiving goods for job work and sending them back to the principal manufacturer after processing. The Revenue contended that this activity amounted to manufacture, necessitating the payment of excise duty instead of service tax under Business Auxiliary Services. The Original Adjudicating Authority confirmed the demands, penalties, and confiscation of goods. However, the Commissioner (Appeals) set aside the order, stating that the process did not amount to manufacture, citing relevant case law. The Commissioner observed that the appellant was paying service tax on job work charges, which was reflected in the returns filed, and there was no objection from the department. The Commissioner held that the demand of excise duty was not sustainable based on these grounds.

2. The Commissioner also addressed the issue of limitation, stating that the extended period was not applicable as there was no evidence of suppression of facts by the appellant. The Commissioner referred to a Supreme Court decision emphasizing that positive action or deliberate withholding of information is necessary to invoke the extended period of limitation. Since the appellant was transparent in paying service tax and there was no objection from the department, the demand for excise duty was deemed unsustainable based on the lack of evidence supporting the extended period of limitation.

3. The Commissioner further noted that there was no substantiation in the show cause notice (SCN) regarding the seizure of goods found on the appellant's premises. The Commissioner highlighted that the goods seized were not alleged to be unaccounted for or brought in without duty payment. Therefore, the seizure of goods was deemed unsustainable, especially considering the absence of evidence supporting the demand for excise duty related to those goods. The Commissioner found no infirmity in the order of the Appellate Authority, which rejected the Revenue's appeal based on the lack of evidence indicating malafide intent or suppression of facts by the appellant.

In conclusion, the judgment favored the respondents, emphasizing that the activity did not amount to manufacture, the extended period of limitation was not applicable due to the appellant's compliance with service tax payments, and the seizure of goods lacked substantiation. The decision highlighted the importance of evidence and transparency in tax compliance matters.