2024 (6) TMI 393 - AT - Service Tax

Classification of service - Business Auxiliary Service or not - bought out steel strips are given on job work basis the buyers to the appellant for strapping the steel roll - strapping of steel rolls is important to completing the manufacturing activity of steel sheets - Extended period of limitation. Business Auxiliary servies or not - HELD THAT - Admittedly, the goods in question are Steel Strips which are cleared by the Appellant to various manufacturers of Steel Sheets / Rolls on payment of Excise Duty. After the Steel Strips are received by the buyers, they have given a contract to the Appellant to come to their factory premises and strap the Steel Rolls/Steel Sheets. For such activity, the Appellant is being paid the service charges. The activity carried out by them is a job work on behalf of the client, wherein the ultimate goods are cleared on payment of Excise Duty by the client. This situation is fully covered by the exemption granted under Notification No. 8/2005 dated 01/03/2005. Extended period of limitation - HELD THAT - There are also force that the Appellant being manufacturer and recipient of service would have been filing their ER-1 Returns and ST-3 Returns before the authorities. The Appellant also would be carrying a bonafide belief that since the Excise Duty is paid by the Steel manufacturers after strapping, they are well covered by the exemption under Notification No. 08/2005. Therefore, in such cases, the Appellant cannot be fastened with the suppression clause to demand the Service Tax for the extended period. The confirmed demand for the extended period set aside on account of limitation. Appeal allowed.

Summary

Issues: The issues involved in the judgment are whether the services rendered by the Appellant firms fall under the category of "Business Auxiliary Service" and whether the Appellant is liable to pay Service Tax for the job work undertaken.

Summary:

Issue 1: Classification of Services as "Business Auxiliary Service"

The Appellant contended that the activity of strapping steel rolls amounts to manufacturing under Section 2(f) of the CEA 1944. They argued that under "Business Auxiliary Service (BAS)," the activity is exempted from Service Tax if it amounts to manufacturing. Additionally, they relied on Notification No.8/2005 to support their claim that no Service Tax is required to be paid. The Appellant cited a previous case before CESTAT, Hyderabad, where it was held that no Service Tax is liable for similar job work activities. The Tribunal found that the Appellant's job work activity is covered by the exemption under Notification No. 8/2005 and allowed the Appeal on merits.

Issue 2: Liability to Pay Service Tax

The Adjudicating Authority confirmed the demand for Service Tax, stating that the Appellant failed to pay Service Tax on the service charges received from clients for job work. The Appellant argued that since the Excise Duty was paid by the steel manufacturers after strapping, they were covered by the exemption under Notification No. 8/2005. The Tribunal agreed with the Appellant, stating that the Appellant's activity of strapping steel rolls for clients, using materials supplied by the clients, falls under the exemption and thus, no Service Tax is leviable. The Tribunal also set aside the confirmed demand for the extended period on account of limitation.

In conclusion, the Tribunal allowed the Appeal on merits, finding that the Appellant's job work activity is exempt from Service Tax under Notification No. 8/2005. The Tribunal also held that the Appellant cannot be held liable for the confirmed demand for the extended period due to their bonafide belief in compliance with the exemption notification.