Business Auxiliary Service exclusion depends on Central Excise manufacture and return of processed goods for dutiable manufacture.

Business Auxiliary Service does not exclude job-work merely because the activity amounts to manufacture for another statute; the exclusion applies only where the process is manufacture within section 2(f) of the Central Excise Act and the processed goods are returned for use in manufacture of excisable goods on which duty is payable. Where the resultant goods are not excisable and are not shown to be used in further dutiable manufacture, the service remains taxable. On limitation, deliberate non-registration, non-payment, and non-filing of returns can justify extended period invocation, but once departmental knowledge exists, notice must still be issued within the normal period; demands beyond that period are time-barred, while surviving demands may still carry interest and penalty.

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Issues: (i) Whether job-work production of goods from materials supplied by the client, where the resultant goods were not excisable under the Central Excise Tariff, was excluded from Business Auxiliary Service as manufacture. (ii) Whether the notice covering the earlier period was barred by limitation and whether extended limitation and penalty could be sustained.

Issue (i): Whether job-work production of goods from materials supplied by the client, where the resultant goods were not excisable under the Central Excise Tariff, was excluded from Business Auxiliary Service as manufacture.

Analysis: The definition of Business Auxiliary Service excluded only an activity amounting to manufacture within the meaning of section 2(f) of the Central Excise Act, 1944. The exemption notification for production or processing of goods applied only where the goods were processed from client-supplied materials and returned to the client for use in or in relation to manufacture of excisable goods on which appropriate duty was payable. Since the goods were not classifiable as excisable goods under the Central Excise Tariff and were not shown to have been returned for use in further manufacture of dutiable excisable goods, the activity did not fall within the exclusion. The fact that the goods may have been manufactured for the purposes of the Medicinal and Toilet Preparations Act, 1955 did not expand the Central Excise definition of manufacture for this exemption.

Conclusion: The activity was taxable under Business Auxiliary Service and the exemption was not available.

Issue (ii): Whether the notice covering the earlier period was barred by limitation and whether extended limitation and penalty could be sustained.

Analysis: The absence of registration, non-payment of tax, and non-filing of returns were treated as deliberate contraventions for the purpose of invoking the extended period. However, once the department acquired knowledge of the activity, the notice had to be issued within the normal period. The notice issued on 6-7-2007 was beyond the permissible period from the date of departmental knowledge and was therefore time-barred for the earlier covered period. The later notices survived. Interest and penalty were sustained on the surviving demand.

Conclusion: The notice dated 6-7-2007 was barred by limitation for the relevant period, but the remaining demands were upheld.

Final Conclusion: The taxable character of the activity was affirmed, but one demand was set aside as time-barred, resulting in a partial modification of the adjudication.

Ratio Decidendi: For the BAS exclusion, manufacture must be manufacture within section 2(f) of the Central Excise Act, 1944 and the exemption for job-work processing applies only where the processed goods are returned for use in manufacture of excisable goods on which duty is payable; limitation after departmental knowledge must still be invoked within the normal period.

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