2024 (1) TMI 1308 - AT - Service Tax

Levy of service tax - Management, Maintenance or Repair Service - appellant has to provide their plant for exclusive use of M/s. Gharda Chemicals Limited for manufacture of various chemicals falling under Chapter 28, 29 and 38 of first schedule of Central Excise Tariff Act, 1985 - HELD THAT - The matter is squarely covered by GUJARAT INSECTICIDES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, SURAT-II 2023 (3) TMI 1173 - CESTAT AHMEDABAD holding that the activity undertaken by the appellant is a manufacturing activity of the excisable goods. As per the definition of Business Auxiliary Service provided under Section 65 (105) (zzg) of the Finance Act, 1994, the manufacturing activity of excisable goods under Section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of Business Auxiliary Service and therefore, the demand of service tax is not sustainable in this case. The impugned order-in-original is without any merits and thus not sustainable. Hence, the impugned order is set-aside - appeal allowed.

Summary

Issues:
1. Whether the appellant provided Management, Maintenance, or Repair Service to another company.
2. Whether the service provided falls under the purview of service tax.
3. Whether the appellant's activities can be classified as Business Auxiliary Service.
4. Whether the demand for service tax is sustainable based on the nature of the appellant's activities.

Analysis:
1. The appellant entered into an agreement with another company for the exclusive use of their plant for manufacturing chemicals. The department alleged that the appellant provided Management, Maintenance, or Repair Service, leading to a show cause notice for service tax. The appellant argued that they were engaged in manufacturing activities on a job work basis and not providing the mentioned services.

2. The Tribunal found that the appellant's manufacturing activities were excluded from the definition of Business Auxiliary Service under the Finance Act, 1994. The Tribunal referred to previous decisions where it was held that the appellant's activities constituted manufacturing of excisable goods and not the services in question. The demand for service tax was deemed unsustainable based on this interpretation.

3. The appellant's counsel contended that the activities undertaken were compensated as job work charges, and the manufacturing process was done on behalf of the other company, which supplied inputs and materials. The Tribunal noted that the manufacturing activities were done on a job work basis, and the principal manufacturer was responsible for excise duty on the goods received from the appellant.

4. The Tribunal emphasized that the appellant's activities were manufacturing excisable goods and not Management, Maintenance, or Repair Service. The activities were found to be production on a job work basis, exempted under relevant notifications. The impugned order was set aside as it was deemed without merit and not sustainable. The appeal was allowed, following the decision in the appellant's previous case.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal based on the nature of the appellant's manufacturing activities and their exclusion from the category of services subject to service tax.