2014 (2) TMI 99 - AT - Service Tax

Appeal granted: Power coating & chrome plating for vehicle parts considered manufacturing. Service tax demand unsustainable.

The Tribunal ruled in favor of the appellant, determining that the power coating and chrome plating activities for motor vehicle parts constituted ... Manufacture - process incidental or ancillary to manufacture - business auxiliary service - job work - service tax demand - notification No.214/86-CEManufacture - process incidental or ancillary to manufacture - business auxiliary service - job work - Whether powder coating and chrome plating performed by the appellants on motor vehicle parts received on job work basis amount to manufacture (or processes incidental/ancillary to manufacture) and consequently are not exigible to service tax as a Business Auxiliary Service. - HELD THAT: - The appellants received motor vehicle parts from the principal manufacturer, performed powder coating and chrome plating and returned the parts to the principal manufacturer who used them in the manufacture of excisable goods cleared on payment of duty. The Tribunal accepted the appellants' reliance on earlier decisions holding that electroplating and similar processes performed on job work basis which alter properties of the goods are part of the manufacturing process or are processes incidental or ancillary to completion of manufacture. Applying that principle to the facts, the Tribunal found that the processes undertaken by the appellants form part of the manufacturing process and are therefore not activities attracting service tax under the category of Business Auxiliary Service. The Tribunal accordingly set aside the impugned order of the Commissioner (Appeals). [Paras 6]Powder coating and chrome plating carried out by the appellants on job work basis amount to manufacture or processes incidental/ancillary to manufacture; the appellants are not liable to pay service tax under Business Auxiliary Service and the appeal is allowed.Final Conclusion: The impugned order confirming demand of service tax and penalties under the Business Auxiliary Service category is set aside; the appeal is allowed and the appellants are entitled to consequential relief in accordance with law. Issues:1. Appeal against demand of service tax under Business Auxiliary Service category for power coating and chrome plating activity.2. Applicability of Notification No. 214/86-CE for clearance of goods at nil rate of duty.3. Determination of whether the activity undertaken amounts to manufacture under Central Excise Act.Analysis:1. The appellant filed an appeal against the demand of service tax under the Business Auxiliary Service category for power coating and chrome plating activities for motor vehicle parts received on job works basis. The Revenue issued a show cause notice, confirmed the demand, and imposed penalties. The appeal was dismissed by the Commissioner (Appeals).2. The appellant contended that they were working under Notification No. 214/86-CE and the processes undertaken by them amount to manufacture as per relevant tribunal decisions. They argued that the activities of power coating and chrome plating are part of the manufacturing process, and the goods cleared are used in the manufacture of excisable goods cleared on payment of duty.3. The Revenue, on the other hand, argued that the activities undertaken by the appellant do not amount to manufacture as they were clearing goods under Notification No. 214/86 at nil rate of duty. However, the Tribunal found that the processes of power coating and chrome plating undertaken by the appellant constitute manufacturing activities based on relevant tribunal decisions cited by the appellant.4. The Tribunal, after considering the arguments and relevant case laws, concluded that the appellant's activities indeed amount to manufacture within the meaning of the Central Excise Act. Therefore, the demand of service tax under the Business Auxiliary Service category was deemed not sustainable. The impugned order was set aside, and the appeal was allowed. The appellant was granted consequential relief as per the law.5. In summary, the Tribunal ruled in favor of the appellant, stating that the activities of power coating and chrome plating for motor vehicle parts qualified as manufacturing processes under the Central Excise Act. As a result, the demand for service tax under the Business Auxiliary Service category was rejected, and the appellant was entitled to consequential relief as per the law.