2009 (4) TMI 112 - AT - Service Tax

Activities of Auto Coats not Business Auxiliary Service: Tribunal Decision

The appellants, M/s. Auto Coats, Coimbatore, were engaged in activities like power coating, bending, and drilling of components from 10.9.2004 to ... Job Working Activity – Scope of BAS prior to 31.5.2005 - . The appellants undertook the activity of power coating, bending, drilling etc. of components and machinery parts for a consideration. It cannot be said that they had undertaken the various activities on behalf of any other person. They had undertaken the activities themselves for a fee – demand is not sustainable. Issues:1. Whether the appellants engaged in Business Auxiliary Service (BAS) during a specific period.2. Whether the demand and penalties imposed on the appellants are sustainable under the Finance Act, 1994.Issue 1:The case involved M/s. Auto Coats, Coimbatore, undertaking activities like power coating, bending, drilling of components and machinery parts from 10.9.2004 to 31.5.2005. The original authority alleged that the appellants engaged in BAS without following statutory formalities, including payment of service tax. A Show Cause Notice was issued, resulting in a demand for service tax of Rs.7,56,365/- and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The impugned order upheld the original authority's decision. The appellants contested the demand and penalties, arguing that the activity did not fall under BAS during the material period. They claimed that the activity was not conducted on behalf of any other person, as required under the relevant entry under BAS. The Tribunal noted that the appellants undertook the activities for a fee and not on behalf of another person. It was observed that the relevant entry under BAS was amended only from 16.6.2005 to include activities undertaken by a person for another. Therefore, the appellants' activities prior to this date did not attract service tax under BAS. Consequently, the impugned order was set aside, and the appeal was allowed.Issue 2:The main contention revolved around whether the demand and penalties imposed on the appellants were sustainable under the Finance Act, 1994. The appellants argued that the impugned demand and penalties were not justified as the activities undertaken by them did not meet the criteria for service tax under BAS during the material period. The Tribunal agreed with the appellants, emphasizing that the activities were not conducted on behalf of another person as required by the law at that time. Since the appellants had processed goods for their customers and not on behalf of a client, the imposition of service tax and penalties was deemed unsustainable. The Tribunal set aside the impugned order, thereby allowing the appeal in favor of the appellants.This judgment highlights the importance of analyzing the specific legal provisions and definitions applicable during the relevant period to determine the tax liability accurately. It underscores the necessity for activities to meet the statutory requirements for taxation, emphasizing the need for a clear legal basis for imposing demands and penalties under the law.