Manufacture characterization in powder coating activity supported waiver of pre-deposit and stay of service tax recovery.

An application for waiver of pre-deposit and stay of recovery was allowed where the disputed service tax demand arose from powder coating of customer-supplied materials. The applicants contended that the activity constituted manufacture and therefore fell outside the service tax classification adopted by the department. On the material placed before it, CESTAT Bangalore found a prima facie case supporting the view that the activity pertained to manufacture. The Tribunal accordingly granted waiver of pre-deposit and stayed recovery of the disputed amount.

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Issues: Whether the applicants were entitled to waiver of pre-deposit and stay of recovery in respect of the service tax demand, on a prima facie showing that the activity undertaken amounted to manufacture.

Analysis: The applicants asserted that the work of powder coating of customer-supplied materials was a manufacturing activity and, therefore, not liable under the service tax classification adopted by the department. On the material placed before it, the Tribunal found that a prima facie case had been made out in support of the claim that the activity pertained to manufacture.

Outcome: The waiver of pre-deposit was granted and recovery of the disputed amount was stayed.

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