2014 (3) TMI 270 - AT - Service Tax

Benefit of Notification No. 8/2005-ST dated 1.3.2005 - Cutting and slitting of coils - Job Work - Whether this activity amounts to manufacture or not - Held that - The activity undertaken by the appellant is only slitting/cutting of length of HR/CR coils of stainless steel. The Hon ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association - 2003 (11) TMI 107 - HIGH COURT OF DELHI held that the cutting and slitting of coils would not amount to manufacture. Therefore, the contention of the appellant that cutting and slitting of HR/CR coils would amount to manufacture is no longer sustainable in view of the decisions cited supra. However, the contention of the appellant that it is only an intermediate process and the goods after slitting/cutting were used in further manufacture of SS pipes/tubes on which duty liability is discharged, merits consideration. Notification No. 8/2005-ST provides that in the case of service undertaken by way of job-work and the goods are returned to the original supplier for further manufacture, the benefit of the said exemption would apply. This aspect has not been examined by the adjudicating authority at all - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Whether the activity undertaken by the appellant amounts to manufacture or service activity.
2. Liability of the appellant to discharge Service Tax for services rendered.
3. Applicability of Notification No. 8/2005-ST for exemption from Service Tax.

Analysis:

Issue 1:
The appellant claimed that the activity undertaken by them constitutes manufacture and not a service activity, thus arguing against the liability to discharge Service Tax. The appellant undertook job work for certain companies involving processes like slitting/cutting of HR/CR coils of Stainless Steel. The appellant relied on precedents where movement of goods under specific procedures was held exempt from Service Tax. However, the Tribunal noted that cutting and slitting of coils does not amount to manufacture based on previous court decisions. The Tribunal considered whether the activity was an intermediate process and if the goods were used for further manufacture, which could make the appellant eligible for exemption under Notification No. 8/2005-ST.

Issue 2:
The lower appellant authority had rejected the appellant's claim, leading to the appeal. The appellant argued that even if the activity was considered a taxable service and not manufacture, they should be eligible for the benefit of Notification No. 8/2005, thus avoiding the liability of Service Tax. The Revenue, represented by the Additional Commissioner, maintained that the activity did not amount to manufacture and should be treated as a service, advocating for the appellant to be held liable for Service Tax.

Issue 3:
The Tribunal found that the activity of the appellant did not amount to manufacture but considered the possibility of eligibility for the exemption under Notification No. 8/2005-ST. As this aspect had not been examined by the adjudicating authority, the Tribunal set aside the impugned order and remanded the case back for a fresh consideration. The Tribunal directed the adjudicating authority to provide specific findings on why the activity undertaken by the appellant may or may not be eligible for the benefit of the said exemption, ultimately allowing the appeal by way of remand and disposing of the stay application.