2020 (3) TMI 484 - AT - Service Tax

Nature of activity - process amounting to manufacture or not - sale or service? - job-work for the manufacture of Hand-pumps, who were sending them semi-finished hand-pumps for the purpose of galvanization. After galvanization, the galvanized hand-pumps were being returned to the principal manufacturer - credit availed on various inputs used for their own manufacture as also for galvanization on job-work basis, they were reversing the credit in respect of the goods so used for galvanization - benefit of N/N. 10/2006-CE. - suppression of facts or not - time limitation. Revenue entertained a view that galvanization undertaken by the appellant is not a manufacturing process and same amounts to providing Business Auxiliary Service to principal manufacturer and as such the appellant should have paid the service tax on the same. HELD THAT - The appeal can be disposed on the point of limitation itself. Admittedly, the entire demand is beyond the normal period of limitation. It is also a fact that the appellants were disclosing the reversal of Cenvat credit in respect of the items used in the job work activity, in their monthly returns. This fact is sufficient enough to establish the bonafide of the assessee that they were entertaining bonafide belief that the galvanization amounts to manufacture and since hand-pumps were exempted, there is no requirement to pay any duty of excise also. In the absence of any other evidence to attribute any malafide on the appellant, the extended period is not available to revenue - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether galvanization process amounts to providing 'Business Auxiliary Service' and attracts service tax.
2. Whether the extended period of limitation can be invoked for demanding service tax on galvanization process.

Analysis:
1. The appellant, engaged in manufacturing G.I. Pipes and parts of Transmission Towers, also undertook job-work for galvanizing hand-pumps, which were then returned to the principal manufacturer. The Revenue contended that galvanization does not constitute manufacturing and should be taxed as 'Business Auxiliary Service.' A show cause notice was issued for service tax payment, which was confirmed by the Adjudicating Authority and upheld by the Commissioner. The appellant argued that galvanization is a manufacturing process and the hand-pumps were exempted. The Tribunal held that the galvanization process amounted to manufacturing, and since the hand-pumps were exempted, it did not fall under 'Business Auxiliary Service.' The appeal was allowed on this ground.

2. The Revenue invoked the extended period of limitation for demanding service tax, alleging non-disclosure of the nature of job work. The Tribunal observed that the appellant had disclosed the reversal of Cenvat credit in their monthly returns, indicating a bona fide belief that galvanization was manufacturing and no excise duty was payable due to the exemption on hand-pumps. As there was no evidence of malafide intent, the Tribunal held that the extended period was not applicable to the Revenue. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.