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2023 (9) TMI 810 - AT - Service TaxClassification of services - Business Auxiliary services or not - appellants were engaged in the activity of production or not - HELD THAT - The issue came up before this Tribunal in the appellants own case M/S FERRO SCRAP NIGAM LIMITED VERSUS CCE, RAIPUR 2014 (1) TMI 1049 - CESTAT NEW DELHI and this Tribunal has observed that appellant s activity prior to June 2005 cannot be held to be exigible to service tax under the category of BAS. Thus, the activity undertaken by the appellants is not taxable service - no service tax is payable by the appellants - appeal allowed.
Issues Involved:
1. Taxability of the appellant's activities under the category of Business Auxiliary Services (BAS) before and after 16.06.2005. 2. Entitlement to the benefit of exemption Notification No. 8/2005 dated 01.03.2005. Summary of Judgment: Issue 1: Taxability under Business Auxiliary Services The appellant, a Public Sector Undertaking, entered into long-term contracts with various steel plants for recovering, handling, transporting, and processing slag scrap mixtures. The processing of slag scrap mixture was undertaken to obtain iron and steel scrap, which was then handed over to the customers for further use in manufacturing dutiable goods. The Department raised a disputed demand of service tax under the category of Business Auxiliary Services (BAS) up to 16.06.2005, alleging that the activity amounted to production and, thereafter, processing, which is taxable under BAS. The Tribunal referred to its previous decisions, including the appellant's own case reported in 2014 (36) STR 955 (Tri.-Del.) and 2019 (25) GSTL 299 (Tri-Kolkata). It was held that prior to June 2005, the activity did not amount to "production of goods" as the term "production" was substituted by "processing" in June 2005. The activity undertaken by the appellant did not satisfy the criteria of being "on behalf of the client," as clarified by Board Circulars and Tribunal decisions, including Auto Coats and Sonic Watches Ltd. Therefore, no service tax was exigible under BAS for the period before 16.06.2005. For the period after 16.06.2005, the Tribunal noted that the definition of BAS included "processing of goods." However, the activity of processing scrap did not qualify as processing under the exemption Notification No. 8/2005, as the scrap did not qualify as raw materials or semi-finished goods. Issue 2: Entitlement to Exemption Notification No. 8/2005 The Tribunal examined whether the appellant was entitled to the benefit of exemption Notification No. 8/2005 dated 01.03.2005, which exempts the taxable service of production or processing of goods for, or on behalf of, the client, provided the goods are produced or processed using raw materials or semi-finished goods supplied by the client and returned for use in manufacturing dutiable goods. The Tribunal referred to the appellant's case reported in 2019 (25) GSTL 299 (Tri-Kolkata), where it was held that the scrap recovered and returned to the client qualifies as raw material for further manufacture within the steel plant. The Tribunal accepted the certificate issued by M/s. SAIL, Bokaro Steel Plant, confirming that the processed scrap was used for manufacturing dutiable steel products. Hence, the appellant was entitled to the benefit of Notification No. 8/2005. Conclusion: The Tribunal held that the appellant's activities were not taxable under BAS for the period before 16.06.2005 and were entitled to the benefit of exemption Notification No. 8/2005 for the period after 16.06.2005. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.
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