2018 (5) TMI 482 - AT - Service Tax

Benefit of N/N. 8/2005-ST dated 01/03/2005 - Job work - Production / Manufacture of goods - BAS - Department took the view that since goods are produced not exclusively using the raw material supplied by the client, the respondent will not be entitled to the benefit of notification exempting service tax - Held that - The proviso to section 93, specifies that the benefit has to be available if the assessee are using the raw material supplied by the clients. The proviso does not specify that the goods should be produced only using the raw materials or semi-finished goods supplied by the clients. There is no dispute in the present case that the semifinished goods was supplied by M/s Grasim Industries Limited on such goods. The activity of rubber lining has been carried out - benefit of notification cannot be denied. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
Interpretation of Notification No. 8/2005-ST for service tax exemption on goods produced on behalf of a client.

Analysis:
The Department filed an appeal against an order-in-Appeal, challenging the exemption granted to a proprietary firm engaged in rubber lining work for M/s Grasim Industries Limited under Notification No. 8/2005-ST. The Department contended that the firm was not entitled to the exemption as they used some raw materials from their own account during the activity, not exclusively supplied by the client. The dispute centered around whether the firm met the conditions of the notification for service tax exemption. The notification specified that goods should be produced using raw materials or semi-finished goods supplied by the client and returned back to the client for further use in manufacturing other goods. The Tribunal noted that the proviso did not mandate that goods should be produced solely using client-supplied materials, only that they should be used in production. It was established that the semi-finished goods were supplied by the client, and the activity did not amount to manufacturing under Section 2(f) of the Central Excise Act. Consequently, the Tribunal upheld the order-in-Appeal, dismissing the Department's appeal and disposing of any cross objections.

This judgment highlights the importance of strict interpretation of statutory notifications for tax exemptions and the significance of meeting specified conditions for entitlement. The Tribunal's analysis focused on the language of the notification and the factual circumstances of the case to determine the firm's eligibility for the service tax exemption. The decision underscores the need for clarity in statutory provisions to avoid ambiguity and ensure consistent application of tax laws.