2025 (3) TMI 1401 - AT - Service Tax

Process amounting to manufacture - process of drawing wire from wire rod - liability of appellant to pay Service Tax under the transportation of goods by road (GTA) service category when the vehicles were hired from local transporters who did not issue consignment notes - business auxiliary services. Business auxiliary service - HELD THAT - From the definition of business auxiliary service it is seen that if the activity undertaken by the appellant amounts to manufacture of excisable goods then the said activity shall be excluded from the said definition. As the activity of drawing of wire from wire rod supplied by the customer amounts to manufacture the services undertaken by the appellant do not fall within the ambit of the taxable service of business auxiliary service as defined under Section 65(19) of the Act. Thus the job work undertaken by the appellant does not amount to business auxiliary services as held in the impugned order. Consequently the demand of Service Tax confirmed under this category is not sustainable and hence the same is set aside. Demand confirmed under the category of GTA service - HELD THAT - The appellant has hired vehicles from local vehicle providers who have not issued any consignment notes. Hence they cannot be considered as goods transport agencies within the meaning of Section 65(50b) of the Finance Act 1994. The liability of the appellant to pay Service Tax under the category of transportation of goods by road (GTA) service arises only when the appellant receives services from a goods transport agency who issues a consignment note by whatever name it may be called. In these circumstances the appellant is not liable to pay Service Tax under the category of GTA service in respect of the expenditure incurred by them for transportation of goods during the impugned period as the services were not received from a GTA who issues consignment notes - as the suppliers were not goods transport agencies within the meaning of Section 65(50b) of the Act as they have not issued any consignment notes the services received by the appellant cannot be held liable to Service Tax under reverse charge mechanism at the hands of the appellant under the category of GTA service. Accordingly the demand of Service Tax confirmed under this category is not sustainable and therefore the same is set aside. Interest and penalty - HELD THAT - As the demands confirmed against the appellant do not survive the question of demanding interest thereon or imposing penalties does not arise. Conclusion - i) As the activity of drawing of wire from wire rod supplied by the customer amounts to manufacture the services undertaken by the appellant do not fall within the ambit of the taxable service of business auxiliary service as defined under Section 65(19) of the Act. ii) Service tax under the GTA category requires issuance of consignment notes by a goods transport agency. The impugned order is set aside - appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the activity of drawing wire from wire rods, undertaken by the appellant, constitutes 'manufacture' and thus falls outside the scope of 'business auxiliary service' under Section 65(19) of the Finance Act, 1994.
• Whether the appellant is liable to pay Service Tax under the 'transportation of goods by road' (GTA) service category when the vehicles were hired from local transporters who did not issue consignment notes.

ISSUE-WISE DETAILED ANALYSIS

Business Auxiliary Service Issue

• Relevant legal framework and precedents: The definition of 'business auxiliary service' under Section 65(19) of the Finance Act, 1994, excludes activities that amount to the manufacture of excisable goods.
• Court's interpretation and reasoning: The Tribunal observed that the process of drawing wire from wire rods amounts to 'manufacture'. Therefore, it does not fall within the ambit of 'business auxiliary service' as per the definition provided in the Act.
• Key evidence and findings: The appellant's activity of drawing wire from wire rods was deemed to constitute 'manufacture', thus excluding it from being classified as 'business auxiliary service'.
• Application of law to facts: By applying the legal definition, the Tribunal concluded that the service tax demand of Rs.60,156 under 'business auxiliary service' was not legally sustainable.
• Treatment of competing arguments: The appellant argued that their activity was manufacturing, not a service, which the Tribunal accepted, setting aside the contrary findings of the lower authorities.
• Conclusions: The demand for service tax under the 'business auxiliary service' category was set aside.

Goods Transport Agency (GTA) Service Issue

• Relevant legal framework and precedents: The liability to pay service tax under the GTA category arises when services are received from a 'goods transport agency' that issues consignment notes, as defined under Section 65(50b) of the Finance Act, 1994.
• Court's interpretation and reasoning: The Tribunal noted that the appellant hired vehicles from local transporters who did not issue consignment notes, thereby not qualifying as 'goods transport agencies'.
• Key evidence and findings: The absence of consignment notes was crucial. The Tribunal referenced the decision in Narendra Road Lines Pvt. Ltd. v. Commissioner of Cus., C.Ex. & C.G.S.T., Agra, which supported the appellant's position.
• Application of law to facts: The Tribunal applied the definition and found that, since no consignment notes were issued, the appellant was not liable for service tax under the GTA service category.
• Treatment of competing arguments: The appellant's contention that no service tax was due without consignment notes was upheld, contrary to the Revenue's position.
• Conclusions: The demand for service tax under the GTA category was set aside.

SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "As the activity of drawing of wire from wire rod supplied by the customer amounts to 'manufacture', we are of the view that the services undertaken by the appellant do not fall within the ambit of the taxable service of 'business auxiliary service' as defined under Section 65(19) of the Act."
• Core principles established: Activities constituting 'manufacture' are excluded from 'business auxiliary service'. Service tax under the GTA category requires issuance of consignment notes by a 'goods transport agency'.
• Final determinations on each issue: The Tribunal set aside the service tax demands under both 'business auxiliary service' and 'GTA service' categories, as the conditions for these classifications were not met.

In conclusion, the Tribunal allowed the appeal filed by the appellant, setting aside the impugned order and granting consequential relief as per law.