2017 (10) TMI 614 - AT - Service Tax

Manufacture - Scope of Business Auxiliary Services - processing of goods - whether the manufacturing of boilers and parts thereof on behalf of client would fall within the definition of Business Auxiliary Service? - Held that - The Hon ble Apex Court in the case of Commissioner of Income Tax, Kerala Vs. Tara Agencies 2007 (7) TMI 4 - SUPREME COURT OF INDIA has held that On clear construction and interpretation of Section 35B(1A) of the Act, we are clearly of the opinion that the responden s activity amounts to processing only and the activity does not amount to either production or manufacture . The term processing has not been included in Section 35B(1A) of the Act, therefore, the respondent is not entitled for weighted deduction under Section 35B(1A) of the Act. The activity of the appellants would not amount to manufacture - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the manufacturing of boilers and parts on behalf of a client falls within the definition of Business Auxiliary Service.

Analysis:
The appellant, engaged in manufacturing boilers and parts, received a show cause notice proposing a service tax demand for job work activities for a specific period. The original authority confirmed the demand along with interest and penalties under various sections of the Finance Act, 1994. On appeal, the Commissioner (Appeals) upheld the order, leading to the current appeal before the Tribunal.

The appellant argued that the job work activities carried out for a specific client were not covered under Business Auxiliary Service (BAS) until a later date. They cited relevant judgments to support their argument, emphasizing that prior to a certain date, such activities were not taxable under BAS. The appellant contended that the scope of BAS did not cover their activities during the relevant period.

The department's position was that the manufacturing activities undertaken by the appellant on behalf of a client amounted to the manufacture of goods. Reference was made to a judgment discussing the distinction between production, manufacturing, and processing of goods. The Tribunal analyzed the terms 'production,' 'manufacture,' and 'process' in detail to determine the nature of the appellant's activities.

Based on the analysis and precedents cited, the Tribunal concluded that the appellant's activities did not amount to manufacturing. Drawing parallels with previous judgments, the Tribunal held that the demand for service tax was unsustainable. Consequently, the impugned orders confirming the demand and penalties were set aside, and the appeals were allowed with any consequential reliefs.

In the final judgment, the Tribunal ruled in favor of the appellant, determining that the manufacturing activities of boilers and parts on behalf of a client did not fall within the scope of Business Auxiliary Service. The decision was based on a detailed analysis of the terms involved and relevant legal precedents, ultimately leading to the setting aside of the demand and penalties imposed on the appellant.