2018 (5) TMI 1469 - AT - Service Tax

Solar cell lamination qualifies as 'manufacture,' exempting service tax. Tribunal upholds lower authority's decision.

Commissioner of Central Excise & ST, Coimbatore Versus Udhya Semiconductors Ltd.

The Tribunal held that the lamination of solar cells constituted 'manufacture,' exempting the respondents from service tax liability under Business ... BAS - Job-work - process of lamination of solar cells - It appeared to the department that the processes undertaken by the respondents do not amount to 'manufacture', in terms of Section 2 (f) of the Central Excise Act, 1944 and the activity is squarely covered under 'Business Auxiliary Service' - benefit of N/N. 8/2005 dt. 1.3.2005. Held that: - it cannot be disputed that respondents receive Photovoltaic Cells from their principal on which they carry out job work, resulting in Photovoltaic Solar Laminate. The product Solar Laminate that emerges after all of these activities is sent to the principal for further processing and completion of Solar Photovoltaic Module - The lower appellate authority has noted that the SCN is limited to the activity of ‘lamination‟, however it is silent on how the lamination does not amount to 'manufacture'. The lower appellate authority arrived at a conclusion that activity “lamination’ for which the job order was given to the respondent by the 100% EOU is in fact, a series of activities to manufacture “Solar PV Laminate’ and that the process amounts to ‘manufacture‟ within the meaning of Section 2(f) of the Central Excise Act, 1944, hence the job work activity will not attract levy of service tax under “Business Auxiliary Service’ as defined in Section 65 (19) of the Finance Act, 1994. We are not able to find any infirmity in these findings of the lower appellate authority. The job work activity carried out by the respondents will only have to be considered as amounting to ‘manufacture’, hence same cannot be again considered as ‘Business Auxiliary Service‟ and service tax cannot be demanded on the activity under BAS - appeal dismissed - decided against Revenue. Issues:1. Whether the activity of lamination of solar cells amounts to 'manufacture' or falls under 'Business Auxiliary Service' for the purpose of service tax liability.2. Whether the respondents are eligible for exemption from payment of service tax under Business Auxiliary Service.Analysis:1. The case involved M/s.Udhya Semiconductors Ltd. undertaking lamination of solar cells supplied by Udhaya Solar Photovoltaics Private Ltd. The department contended that the activity did not amount to 'manufacture' but fell under 'Business Auxiliary Service.' A show cause notice was issued proposing a service tax demand. The original authority confirmed the tax demand, but the Commissioner (Appeals) held that lamination amounted to 'manufacture,' exempting the respondents from service tax under BAS. The department appealed against this decision.2. The appellant argued that solar cells remained unchanged after job work, thus no 'manufacture' occurred. They highlighted that the exemption under Notification No.8/2005-ST applies only if the job worked products are used in manufacturing goods subject to excise duty. The respondents argued that lamination led to a new product, the solar panel array, constituting 'manufacture' exempt from service tax under BAS. They also contended that job work for the EOU did not attract service tax liability under BAS.3. The Tribunal examined the activities involved in the job work process, including tabbing, stringing, lamination, curing, and more. The lower appellate authority found fault with the original authority for not allowing the respondents to respond to a report before confirming the tax demand. After thorough analysis, the Tribunal agreed with the lower authority that lamination constituted 'manufacture,' exempting the respondents from service tax under BAS. The Tribunal upheld the lower appellate authority's decision, dismissing the Revenue's appeal.4. The Tribunal concluded that the job work activity amounted to 'manufacture,' precluding it from being classified as 'Business Auxiliary Service' for service tax purposes. The respondents were found eligible for exemption from service tax liability under BAS. The Tribunal upheld the lower appellate authority's decision, dismissing the Revenue's appeal.