2018 (2) TMI 147 - AT - Service Tax

Appeal allowed as activity was deemed job work, not production. Service tax upheld post amendment.

The appeal was allowed as the Bench found that the appellant's activity of powder coating on aluminum channels/frames constituted job work and processing ... Business Auxiliary Services - appellants were doing powder coating on the aluminium channels / frames supplied by the customers - Held that: - issue is decided in the case of M/s. Hitech Industrial Lining Pvt. Ltd. Versus Commissioner of Central Excise, Salem [2017 (8) TMI 837 - CESTAT CHENNAI], where it was held that the appellant was only discharging job work much amounted to processing of goods and therefore did not involve any production of goods - appeal allowed - decided in favor of appellant. Issues:Interpretation of 'Business Auxiliary Services' in relation to processing of goods for clients.Analysis:The case involved a dispute regarding the applicability of service tax on the activity of powder coating on aluminum channels/frames provided by customers. The Department argued that this activity falls under 'Business Auxiliary Services'. The original authority issued an order demanding service tax, interest, and penalties. The Commissioner (Appeals) upheld the order except for setting aside the penalty. The appellant challenged this decision.During the hearing, the appellant's counsel cited precedents like Rathour Engg. Works and Hitech Industrial Lining Pvt. Ltd. to support their case. The appellant argued that the activity was merely job work and did not involve production of goods. The Bench referred to its earlier decision in the case of Hitech Industrial Lining Pvt. Ltd., where it was held that activities like rubber lining and re-rubber lining did not amount to production of goods. The Bench noted that the appellant's activities were job work and processing of goods, not production.The definition of 'Business Auxiliary Service' was crucial in this case. An amendment effective from 16.6.2005 included the production or processing of goods for or on behalf of the client. The Bench found that the appellant's activity became taxable only from 16.6.2005 onwards. Only one invoice fell beyond this date, and the service tax levy was sustained on that. For demands prior to 16.6.2005, the Bench held them as unsustainable and set them aside. Penalties were also not imposed based on the same reasoning.Following the precedents and the interpretation of the law, the Bench concluded that the impugned order could not be sustained. Therefore, the appeal was allowed, and consequential relief, if any, was granted as per the law. The decision was dictated and pronounced in court, setting aside the original order and providing relief to the appellant.