Tribunal rules processing activity as manufacture, exempts from Service Tax

The Tribunal ruled in favor of the appellant, setting aside the Order-in-Original that demanded Service Tax on processing activity. The Tribunal held that the processing activity amounted to manufacture, making the appellant liable for Central Excise duty, not Service Tax. It was determined that the processing activity fell under the negative list of services post 01.07.2012, justifying the rejection of the Service Tax demand. The decision was supported by the rescission of relevant notifications, leading to the appeal being allowed.

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Issues:
Challenge to Order-in-Original demanding Service Tax on processing activity under business auxiliary service category. Interpretation of Notification No.8/2005-ST rescission. Applicability of Central Excise duty on processing activity. Interpretation of Section 66D (f) of negative list of services post 01.07.2012.

Analysis:
The appeal challenged an Order-in-Original demanding Service Tax on the processing activity carried out by the appellant for a cooperative milk producer. The Department argued that the activity fell under the business auxiliary service category. The Adjudicating Authority upheld the demand citing the rescission of Notification No.8/2005-ST. The appellant contended that the processing activity amounted to manufacture, making them liable for Central Excise duty, not Service Tax. The appellant referred to a previous Tribunal order supporting their stance. The Tribunal noted that the processing activity indeed amounted to manufacture as per deeming provisions in the Central Excise Tariff Act, thus rejecting the Service Tax levy justification.

Regarding the period under consideration (October 2012 to March 2014), the Tribunal highlighted the shift in Service Tax levy post 01.07.2012 to include all services except those in the negative list specified in Section 66D. The Adjudicating Authority failed to consider this shift, focusing on pre-2012 provisions. Even under the new provisions, the processing activity was covered under the negative list, specifically Section 66D (f), justifying the rejection of the Service Tax demand. The relevant Notification No.34/2012-ST had been rescinded, further supporting the decision to set aside the impugned order and allow the appeal.

In conclusion, the Tribunal set aside the Order-in-Original, ruling in favor of the appellant based on the manufacturing nature of the processing activity and its coverage under the negative list of services post 01.07.2012, despite the rescission of relevant notifications.

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