2022 (3) TMI 1215 - AT - Service Tax

CENVAT Credit - rendering both taxable as well as exempted services - cutting of hot rolled / cold rolled coils into sheets on job work basis - non-maintenance of separate records - invocation of rule 6 of CCR - HELD THAT - Admittedly, it is not the case of the Revenue that no tax/duty is paid. From the perusal of the impugned Order-in-Appeal as well as Order-in-Original, it is found that the authorities below have not made any efforts to analyse the services provided by the appellant vis- -vis Rule 2(e), to buttress their contention that what the appellant was doing would or would not fall under the definitions of Rule 2(e). Just because the appellant is not paying the tax/duty, that by itself would not be termed as exempted services . The statute has clearly defined exempted services to mean those which are exempted from the whole of service tax which would include those services on which no service tax is leviable under Section 66 of the Finance Act and until or unless the above conditions are satisfied, anything or everything cannot brought within the purview of exempted services. When the appellant claims right from the beginning that insofar as job work issue was concerned, the applicable duty/tax was paid by the principal manufacturer, no attempt was made to disprove the same by the revenue, they simply went on the premeditated misconception that the job work on which the appellant was not paying taxes, was an exempt service. This is without any basis which cannot be sustained. Scope of Rule 6 therefore is to be of limited applicability in such a scenario, as held by the Learned larger Bench of CESTAT in the case of STERLITE INDUSTRIES (I) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE 2004 (12) TMI 108 - CESTAT, MUMBAI , which order was later-on approved by the Hon ble Mumbai High Court, COMMISSIONER VERSUS STERLITE INDUSTRIES (I) LTD. 2008 (8) TMI 783 - BOMBAY HIGH COURT . This very decision has been followed in a number of cases by various benches and hence, this issue does not require any further deliberations. The demands raised are contrary to law and hence, the same are set aside, being unsustainable - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against two separate Orders-in-Appeal; Whether appellant's activities amount to exempted services under Rule 2(e) of CCR; Applicability of Notification No. 8/2005-ST and No. 25/2012-ST; Interpretation of job work provisions and duty payment by principal manufacturers.

Analysis:
1. The appellant filed appeals against two Orders-in-Appeal, consolidated for convenience. The appellant undertakes activities like decoiling, leveling, and shearing/slitting of HR or CR coils on a job work basis. The issue revolves around whether these activities constitute exempted services under Rule 2(e) of CCR. The primary contention is that the appellant avails exemptions under Notification No. 8/2005-ST and No. 25/2012-ST based on the duty payment by principal manufacturers, and the appellant charges job work charges accordingly.

2. The Revenue contended that the appellant was rendering both taxable and exempted services without analyzing the services provided in light of Rule 2(e). However, the Tribunal found that the appellant's activities did not automatically qualify as exempted services solely because no tax/duty was paid. The Tribunal emphasized that exempted services must meet specific conditions outlined in the statute, and the Revenue failed to disprove the duty payment by principal manufacturers for job work activities.

3. Referring to legal precedents, including the case of Escorts Ltd. Vs. CCE, Delhi, the Tribunal highlighted that service providers of job work can avail CENVAT credit, and the exemption under Notification 8/2005-ST is contingent upon duty payment by principal manufacturers. The Tribunal also cited decisions by the Hon'ble High Court of Judicature at Madras, supporting the interpretation that job work activities, when done under specific provisions and duty payment mechanisms, do not fall under the purview of exempted services.

4. In light of the legal principles established by higher courts and the interpretation of job work provisions, the Tribunal concluded that the demands raised against the appellant were contrary to law. The Tribunal set aside the impugned orders, allowing the appeals with consequential benefits. The judgment emphasized the importance of correctly applying the law to distinguish between taxable and exempted services in the context of job work activities involving duty payment by principal manufacturers.