2023 (2) TMI 781 - AT - Service Tax

Levy of Service Tax - Management, Maintenance Repair Service or not - providing plant A, B D for exclusive use for the manufacture of goods on the input and packing material supplied by M/s. Gharda Chemicals Ltd (GCL) - case of the department is that by providing the plant exclusively for use by M/s. Gharda Chemicals Ltd the appellant have provided the services of Management, Maintenance or Repair and the same is liable to service tax under section 65 (105) (zzg) of the Finance Act, 1994. HELD THAT - From the plain reading of the definition of Management, Maintenance Repair Service the main condition is that the Management, Maintenance Repair Service of the plant should belong to the service recipient and not to the service provider. In the present case the order impugned has held the appellant as service provider and Gharda Chemicals Ltd as service recipient. It is also not disputed that it is the service recipient M/s GCL is paying for the use of manufacturing facilities of the appellant for manufacture of the excisable goods of M/s Gharda chemicals. In this fact the appellant using their own plant machinery equipment that too for production of excisable goods on behalf of M/s Gharda chemical Ltd. In this undisputed fact by any stretch the activities of the appellant cannot be classified under Management, Maintenance Repair Service. The show cause notice has not alleged that the principle manufacture has not cleared their final product without payment of excise duty. Accordingly the activities at the most can be classified under sub clause of production or processing on behalf of the client under business auxiliary service - The activities carried out by the appellant are undoubtedly production of goods on job work basis on behalf of GCL. This position will not alter irrespective of fact that whether the plant, machinery equipment are used exclusively for GCL or partly for GCL or partly for others, therefore, on this basis the activity cannot be classified as Management, Maintenance Repair Service. Thus, the activity of the appellant is indeed manufacture of excisable goods in terms of section 2(f) of CEA, 1944. As per the definition of business auxiliary service manufacture of excisable goods in terms of section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of business auxiliary service. For this reason also, the demand of service tax is not sustainable. Appeal allowed.

Summary

Issues:
1. Whether the appellant providing plant exclusively for use by another company constitutes a service liable for service tax under section 65(105)(zzg) of the Finance Act, 1994.

Analysis:
The appellant, engaged in the production of excisable goods, provided their plant exclusively for the manufacture of goods on behalf of another company. The department contended that this constituted the service of Management, Maintenance, or Repair, subject to service tax. The Adjudicating Authority confirmed a demand for service tax, interest, and penalties. The appellant argued that their activity falls under the exemption for Business Auxiliary Service, as the recipient of the job work goods is liable to pay excise duty. They maintained that the demand under Management, Maintenance, or Repair service is not sustainable.

The definition of Management, Maintenance, or Repair service under section 65(64) of the Finance Act, 1994 was crucial in determining the liability for service tax. The Tribunal noted that for the service to be classified as such, the service recipient should own the plant, not the service provider. The appellant used their own plant and machinery for manufacturing goods on behalf of the other company, making it clear that the activity did not fall under Management, Maintenance, or Repair service. The Tribunal emphasized that the appellant's activities were purely manufacturing excisable goods on a job work basis for the other company, which exempted them from the classification of the disputed service.

Furthermore, the Tribunal found that the appellant's activities constituted the manufacture of excisable goods under the Central Excise Act, 1944, which is excluded from the definition of business auxiliary service. Therefore, the demand for service tax was deemed unsustainable. The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment highlighted that the appellant's manufacturing activities did not qualify as Management, Maintenance, or Repair service, ultimately leading to the decision in favor of the appellant.