2008 (1) TMI 265 - AT - Service Tax

Tribunal exempts powder coating from Service Tax as Business Auxiliary Service

The Tribunal ruled in favor of the appellants regarding the leviability of Service Tax on powder coating processes under 'Business Auxiliary Services.' It ... Activity of powder coating the furniture, electric panel boards, metal cabinets for UPS, stabilizers, etc., & on other metallic items supplied by their customers/clients on job work basis - leviability to Service Tax under category of Business Auxiliary Services - Revenue plea that this process does not amount to manufacture & the appellants are liable to pay Service Tax, is accepted – in respect of exemption of cost of material from payment of service tax, same is allowed in view of not. 29/07 Issues Involved:Leviability of Service Tax under 'Business Auxiliary Services' on powder coating processes undertaken by the appellants.Detailed Analysis:1. Issue of Leviability of Service Tax:The appeals were filed against Orders-in-Appeal passed by the Commissioner of Central Excise, Customs & Service Tax. The issue involved is the leviability of Service Tax under the category of 'Business Auxiliary Services' on the processes undertaken by the appellants, which include powder coating activities. An amendment in the decision of 'Business Auxiliary Services' was made effective from 16.6.2005, which included production or processing of goods for clients for Service Tax liability, as long as these processes do not amount to manufacturing. The DGCEI clarified that powder coating falls under 'Business Auxiliary Services' and does not constitute manufacturing.2. Interpretation of Case Laws:The departmental representative cited various case laws where similar activities were held not to amount to manufacturing. For instance, in the case of Gujarat Steel Tubes Ltd. Vs. State of Kerala and CCE, Mumbai-I Vs. Clad Material System, it was established that processes like galvanization and electroplating do not result in the emergence of new commodities and hence do not amount to manufacturing. Based on these precedents, it was agreed that powder coating does not amount to manufacturing, making the appellants liable to pay Service Tax.3. Exemption and Remand Order:The appellants requested exemption of the cost of materials from the Service Tax payment, citing a government notification. The Tribunal considered Notification No.29/2007, which excludes the value of goods and materials sold to customers for exemption. As the issue involved interpretation of the law, the penalty imposed was deemed unjustified. Consequently, the matter was remanded to the Original Authority to re-calculate the Service Tax after deducting the value of goods and materials sold to customers. The appellants were instructed to provide evidence of the value of goods sold. The Tribunal allowed the appeal, setting aside the impugned order and remanding it for re-computation of tax liability within two months.This judgment highlights the importance of correctly interpreting legal provisions, case laws, and notifications in determining the leviability of Service Tax on specific activities, ensuring fair treatment and adherence to established legal principles.