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2021 (12) TMI 181 - HC - Central ExciseNature of activity - service or process amounting to manufacture - production of electricity - Scope of Business Auxiliary Service - HELD THAT - The Business Auxiliary Service excludes activity that amounts to manufacture. In ORIENT PAPER INDUSTRIES LTD. VERSUS ORISSA STATE ELECTRICITY BOARD 1989 (1) TMI 138 - HIGH COURT OF ORISSA , it was held that electricity that has been specified in the First Schedule to the CE Act after its amendment was excisable goods and, therefore, generation of electricity should be understood as manufacture or production of electricity. In CMS (I) OPERATIONS MAINTENANCE CO. P. LTD. VERSUS C. CE, PONDICHERRY 2007 (5) TMI 74 - CESTAT, CHENNAI , the Southern zonal Bench of the CESTAT held that electricity was manufactured goods in terms of Section 2(f) of the CE Act and, therefore, the activity of electricity generation was not liable to service tax as Business Auxiliary Service under Sections 65 (19) read with 73 of the Finance Act. The Court finds no reason to interfere with the impugned order of the CESTAT in the present case - Appeal dismissed - decided against appellant.
Issues:
- Appeal against order confirming service tax demand on production of electricity as "Business Auxiliary Service" - Interpretation of Section 2(f) of the Central Excise Act, 1944 - Definition of "manufacture" and its application to electricity generation - Scope of "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994 - Exclusion of manufacturing activities from Business Auxiliary Service Analysis: The High Court heard an appeal filed by the Commissioner of Central Excise against an order passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) regarding the service tax demand on electricity production by the Respondent-Assessee. The Commissioner had confirmed a service tax demand against the Respondent for treating the production of electricity as "Business Auxiliary Service." The Commissioner argued that although electricity generation amounted to manufacture under Section 2(f) of the Central Excise Act, the exclusion in the definition of Business Auxiliary Service did not apply. The Court examined Section 2(f) of the Central Excise Act, which defines "manufacture" to include processes specified in the First Schedule to the Central Excise Tariff Act, 1985. Additionally, Section 65(19) of the Finance Act, 1994 defines "Business Auxiliary Service" and explicitly excludes any activity amounting to manufacture within the meaning of the Central Excise Act. The Court noted that the exclusion of manufacturing activities from Business Auxiliary Service was clear. In previous cases, such as Orient Paper & Industries Ltd. v. Orissa State Electricity Board and CMS (I) Operations & Maintenance Co. P. Ltd. v. C.C.E. Pondichery, it was established that electricity generation constituted manufacturing activities and was not liable to service tax under Business Auxiliary Service. The Supreme Court had also upheld a similar decision by the CESTAT, further supporting the non-liability of electricity generation under Business Auxiliary Service. Consequently, the High Court found no legal grounds to interfere with the CESTAT's order in the present case and dismissed the appeal. The Court's decision aligned with the established interpretation that electricity generation falls under manufacturing activities and is excluded from the purview of Business Auxiliary Service. An urgent certified copy of the order was directed to be issued as per rules.
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