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2021 (9) TMI 1269 - AT - Service TaxCENVAT Credit - input services - Job Charges - fixed and variable charges - Supply of Tangible Good Service - suppression of facts or not - invocation of extended period of limitation - HELD THAT - The appellant have actually entered into an agreement for manufacture on job work basis. Evidently as per the agreement the job charges have been spread over in two tier billing i.e. fixed charges and variable charges. The reason being that in summer season there is more demand of packed water and beverages whereas in other months the demand is lower. Keeping in view the constant availability of funds to meet the fixed charges and finance charges and for variable cost towards job charges two tier billing has been provided to the appellant job worker to meet the financial obligation round the year. Admittedly appellant has paid the excise duty on the goods manufactured and cleared for the principal manufacturer as is evident from the copy of excise returns filed before the Tribunal. The job charges received by the appellant have formed part of the cost of manufacture which have suffered excise duty. Accordingly service tax cannot be levied on the fixed components of job charges. There is no nature of pure civil construction service in the facts and circumstances and the facts stated by the appellant and as taken by audit team are undisputed - erection of storage tank and/or pipeline for carrying the concentrate or beverage for processing from one machinery or the other are essential part of the manufacturing process and accordingly the input credit is rightly taken by the appellant. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of fixed job charges as 'Supply of Tangible Goods Service' and liability to service tax. 2. Denial of CENVAT credit on dismantling and packing charges. 3. Denial of CENVAT credit on Commercial & Industrial Construction and Works Contract service. 4. Allegations of suppression of facts and invocation of extended period of limitation. 5. Revenue neutrality and double taxation. Issue-wise Detailed Analysis: 1. Classification of Fixed Job Charges as 'Supply of Tangible Goods Service' and Liability to Service Tax: The appellant, a job worker for HCCBPL, received job charges in two parts: fixed and variable. The department classified the fixed charges as 'Supply of Tangible Goods Service' under the Finance Act 1994, demanding service tax of ?4,68,36,586/- by invoking extended period of limitation due to alleged suppression of facts. The appellant argued that the fixed charges were part of job charges for manufacturing excisable goods, which had already suffered excise duty, thus, demanding service tax on the same transaction would amount to double taxation. The tribunal concluded that the job charges, including fixed charges, formed part of the cost of manufacture, which had already suffered excise duty, and thus, service tax could not be levied on the fixed components of job charges. 2. Denial of CENVAT Credit on Dismantling and Packing Charges: The department disallowed CENVAT credit amounting to ?8,29,510/- on dismantling charges, asserting that these services did not qualify as 'input services' under CCR 2004. The appellant contended that the dismantling of machinery owned by HCCBPL, which was used for manufacturing dutiable goods, had a direct nexus with manufacturing and thus qualified as input service. The tribunal agreed with the appellant, allowing the CENVAT credit on dismantling charges, citing relevant case laws. 3. Denial of CENVAT Credit on Commercial & Industrial Construction and Works Contract Service: The department also disallowed CENVAT credit of ?2,75,558/- on the grounds that it related to civil construction. The appellant clarified that the expenditure was for the erection of bore wells, essential for obtaining pure drinking water, a major input for manufacturing beverages, and for setting up plant and machinery. The tribunal found that the services were directly related to the manufacturing process and allowed the CENVAT credit, noting that the expenditure was not for civil construction but for essential manufacturing infrastructure. 4. Allegations of Suppression of Facts and Invocation of Extended Period of Limitation: The department invoked the extended period of limitation under Section 73(1) of the Finance Act 1994, alleging suppression of facts by the appellant. The appellant argued that the adjudicating authority confirmed the demand on grounds not alleged in the show cause notice, which is impermissible by law. The tribunal did not find sufficient evidence of suppression of facts and set aside the impugned order on this ground. 5. Revenue Neutrality and Double Taxation: The appellant argued that even if service tax was payable on job charges, it would be available as CENVAT credit while paying duty on manufactured goods, making the entire exercise revenue-neutral. The tribunal acknowledged this argument, emphasizing that the job charges had already suffered excise duty, and demanding service tax on the same would result in double taxation, which is not permissible. Conclusion: The tribunal set aside the impugned order, allowing the appeal and entitling the appellant to consequential benefits. The tribunal held that service tax could not be levied on the fixed components of job charges, and CENVAT credit was rightly taken by the appellant for dismantling charges and services related to manufacturing infrastructure. The tribunal also found no suppression of facts warranting the extended period of limitation.
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