2019 (10) TMI 534 - AT - Service Tax

Levy of Service Tax - Work Contract Service or not - Appellants are undertaking fabrication, machining etc. of machinery parts / components on job work basis, out of raw material and with the infrastructure facilities provided in the factories of M/s Larsen Toubro Ltd and M/s Essar Ltd. - Rule 4 (5)(a) of CCR, 2004 read with N/N. 214/86-CE. - Time Limitation - HELD THAT - The appellant has produced the contract of the job work, labour invoices, challans for movement of goods and certificate issued by Principal manufacturers that they have discharged the excise duty on their final product. So far as the activity of fabrication of parts and components, accessories are concerned, the same is not in dispute. The aforesaid services are covered under Business Auxiliary Service in terms of Section 65 (19) (v) of the Finance Act. The activity undertaken by the Appellant would not fall under the category of Works Contract Service as neither there is transfer of any property in this case is involved in the execution of such contract, which is liable to tax as sale of goods nor it is for the purpose specified in sub-clause (a) to (e) of clause (ii) of Explanation to Section 65 (105) (zzzza). In the present case admittedly the Appellant has received the goods under job work challan issued under Notification No. 214/86-CE and Rule 4 (5) (a) of CCR,2004. The principal manufacturer has paid duty on clearance of their final product. In such view of the facts, when the goods were received under cover of challans issued under N/N. 214/86 read with Rule 4 (5)(a) of CCR, 2004, the same is not liable for service tax as the activity undertaken by the Appellant is exempted in terms of N/N. 8/2005 ST dated 1.3.2005. Time Limitation - HELD THAT - The demands are even time barred as the SCN was issued on 25.01.2012 for the period April 2008 to November 2011. The issue involved is of interpretation of statutory provisions and cannot be considered as wilful suppression of facts with an intend to evade payment of service tax. Even otherwise, if any service tax was payable by the appellant, the same was available to the customers as cenvat credit and thus the whole issue becomes revenue neutral. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of statutory provisions regarding the classification of services provided by the Appellant as either 'Work Contract Service' or 'Business Auxiliary Service'; Determination of liability for service tax based on the nature of activities undertaken by the Appellant; Assessment of the applicability of Notification No. 8/2005 - ST dated 1.3.2005 for exemption from service tax; Evaluation of the time bar for demands raised by the adjudicating authority; Consideration of whether there was wilful suppression of facts to evade service tax payment.

Analysis:
The Appellate Tribunal CESTAT Ahmedabad adjudicated on an appeal filed by M/s Nova Tech Engineers against an order by the Commissioner, Service Tax, Ahmedabad. The case involved the Appellants engaging in fabrication and machining of machinery parts on a job work basis using raw materials provided by M/s Larsen & Toubro Ltd and M/s Essar Ltd. The adjudicating authority classified the services as 'Work Contract Service' subject to service tax. However, upon examination, the Tribunal found that the Appellants received raw materials under specific provisions of the Central Excise Rules and produced relevant documentation supporting their activities. The Tribunal determined that the services provided by the Appellants fell under 'Business Auxiliary Service' as defined in the Finance Act, rather than 'Works Contract Service' as alleged by the adjudicating authority.

The Tribunal emphasized that the statutory provisions of Service Tax have an exclusive definition of 'Works Contract,' distinct from the provisions under the CST Act. Citing legal precedents, including the Supreme Court and Tribunal decisions, the Tribunal clarified that the definition of terms in one statute cannot be directly applied to another statute. In this case, since the goods were received under specific provisions exempting them from service tax, and the demands raised were deemed time-barred, the Tribunal concluded that there was no wilful suppression of facts to evade service tax payment. Additionally, any potential service tax liability was available to customers as cenvat credit, resulting in a revenue-neutral scenario.

Therefore, based on the above observations and findings, the Tribunal set aside the order imposing service tax on the Appellants and allowed the appeal with any consequential reliefs. The judgment highlighted the importance of correctly interpreting statutory provisions, distinguishing between different types of services, and ensuring compliance with relevant exemptions and time limitations in tax assessments.