Manufacture on job work basis defeats service tax under Business Auxiliary Service for processing black bars into bright bars.

Conversion of black bars into bright bars on job work basis was treated as manufacture because the same process had already been recognised as manufacture in the assessee's excise operations, and it could not change character merely due to being performed for another party. The view was reinforced by Notification No. 202/88-CE, which applied to manufactured goods and supported the conclusion that the activity was manufacture rather than production of goods on behalf of a client not amounting to manufacture. Accordingly, the processing charges were not exigible to service tax under Business Auxiliary Service, and the demand was unsustainable.

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Issues: Whether conversion of black bars into bright bars on job work basis amounted to manufacture and, consequently, whether the processing charges were exigible to service tax under Business Auxiliary Service.

Analysis: The activity of converting black bars into bright bars had been treated as manufacture in the assessee's own excise operations, and the same process could not be characterised differently merely because it was undertaken on job work basis. The finding was also supported by the exemption under Notification No. 202/88-CE dated 20/05/1988, which applied to manufactured goods and reinforced the conclusion that the activity was one of manufacture rather than a taxable service of production on behalf of a client not amounting to manufacture.

Conclusion: The process amounted to manufacture and the service tax demand under Business Auxiliary Service was not sustainable; the assessee succeeded.

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