2024 (3) TMI 238 - AT - Service Tax

Levy of service tax - Activity amounting to manufacture or not - activity of providing infrastructure support service to GCPL/GSLL for manufacturing - HELD THAT - On going through some of the clauses of the agreement placed before us which indicate that the manufacturer is GCPL/GSLL, but the said activity has been undertaken by the appellant, as appellants are having factory premises to manufacture the goods in question and raw material and machinery being provided by GCPL/GSLL, but manufacturing activity was undertaken by the appellant by employing their own labour and the appellant is charging from the GCPL/GSLL the charges of their activity in terms of per piece basis - On going through the invoice issued by the appellant No.1, the appellant is charging price for goods manufactured by them in terms of quantity of goods manufactured. Moreover, labour has been employed by the appellant and by using their factory and manufactured the goods. These facts have not been examined by the Revenue, moreover, the demands sought to be raised only on the basis of the agreement entered by the appellants with GCPL/GSLL. As the activity undertaken by the appellant is identical which amounts to manufacture, in that circumstances, the appellants are not liable to pay Service Tax on their activity as the manufactured goods has suffered excise duty at the end of the principal - there are no merit in the impugned orders. The same are set aside. Appeal allowed.

Summary

Issues involved: Determination of liability to pay Service Tax on the activity undertaken by the appellants in manufacturing mosquito repellant coils for other companies.

Summary:

Issue 1: Liability to pay Service Tax
The appellants were engaged in manufacturing mosquito repellant coils for other companies. The dispute arose regarding whether the appellants were liable to pay Service Tax on their activity. The Adjudicating authority confirmed that the appellants were not the manufacturer of the goods and thus not eligible for certain exemptions. The appellants contended that their activity amounted to manufacture and therefore they were not liable to pay Service Tax.

Issue 2: Interpretation of Agreements
The Ld.Counsel for the appellant argued that the agreements entered into by the appellants with the companies for whom they were manufacturing the coils supported the contention that their activity amounted to manufacture. The department, however, highlighted certain clauses of the agreements to argue that the appellants were providing Business Support Services and thus liable to pay Service Tax.

Issue 3: Application of Tax Regimes
The Ld.Counsel for the appellant emphasized that under the Positive List Regime, manufacturing activity was excluded from Business Auxiliary Service, and under the Negative List Regime, manufacturing activity was specifically included, indicating that no Service Tax was payable. The department argued that the appellants' activity fell under Business Support Service and was taxable.

Judgment:
The Tribunal examined the agreements and the nature of the appellants' activity in detail. It was observed that the appellants were indeed engaged in manufacturing the goods using their own labor and resources, even though the companies for whom they were manufacturing were the registered manufacturers. The Tribunal referred to previous cases and concluded that the appellants' activity amounted to manufacture, exempting them from paying Service Tax. The impugned orders were set aside, and the appeals were allowed with consequential relief.