2018 (4) TMI 1104 - AT - Service Tax

Business Auxiliary Service - appellants are engaged in job work of shearing, bur removing, welding, straitening, cutting etc. of sheet metal supplied by various clients - Held that - sizing of goods or on behalf of the client was specifically brought in only with effect from 16.06.2005. Admittedly, the appellant was not engaged in the production of any goods - Processes undertaken are specifically covered with effect from 16.06.2005/-. Liability of tax - processing of goods on behalf of 100% EOU - N/N. 8/2005 - Held that - the scope of N/N. 8/2005 has been examined where the Tribunal in Interplex Electronic India Pvt. Ltd. Vs. CST, Bangalore 2013 (5) TMI 451 - CESTAT BANGALORE - EOU are exporting the goods under bond and as such it was held that the appellant assessee who is doing process on behalf of EOU are eligible for the said exemption - exemption allowed. Appeal allowed.

Summary

Issues:
1. Applicability of service tax on job work activities.
2. Exemption under Notification No. 8/2005 for processing goods on behalf of 100% EOU.

Analysis:

Issue 1: Applicability of service tax on job work activities
The appellants were engaged in job work involving various processes on sheet metal supplied by clients. The Revenue contended that the appellants were liable to service tax under the category of Business Auxiliary Services (BAS) as per Section 65(19) of the Finance Act, 1994. The impugned order confirmed a service tax liability of ?10.81 lakhs along with penalties under different sections of the Finance Act, 1994. The appellant's counsel argued that prior to 16.06.2005, no service tax liability would arise on such processing, emphasizing the amendment in the tax entry BAS. It was highlighted that the appellants were only engaged in processing goods, not production. The Tribunal noted that the statutory definition of BAS had changed significantly, specifically including sizing of goods for clients from 16.06.2005. As the appellants were not involved in the production of goods and the processes undertaken were covered post the said date, demands for the period before 16.06.2005 were deemed unsustainable. The Tribunal referred to various decisions supporting this position.

Issue 2: Exemption under Notification No. 8/2005 for processing goods on behalf of 100% EOU
Regarding the tax liability of the appellants for processing goods on behalf of 100% Export-Oriented Units (EOU), the denial of exemption was deemed unjustified. The Tribunal examined the scope of Notification No. 8/2005, where it was held that the exemption should be denied only when the goods manufactured by the principal manufacturer attract nil rate of duty or unconditional full exemption. Since EOUs export goods under bond, it was concluded that the appellant, doing processing on behalf of EOUs, was eligible for the exemption. This interpretation was supported by previous decisions of the Tribunal and High Courts. The Tribunal found no merit in the impugned orders and set them aside, allowing both appeals.

In conclusion, the Tribunal ruled in favor of the appellants, stating that no service tax liability existed for the period before 16.06.2005 and that the appellants were eligible for exemption under Notification No. 8/2005 for processing goods on behalf of 100% EOU.