2018 (7) TMI 920 - AT - Service Tax

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 ... Business Auxiliary Services or manufacture? - activity of processing of raw-milk and packaging the same - Held that:- An identical issue has already been decided by the Tribunal in favour of the appellant in the case of M/S SHRI VRINDAVAN DAIRIES VERSUS CCE & ST, JAIPUR – I [2018 (6) TMI 804 - CESTAT NEW DELHI], where it has been held by the Tribunal that since the activity carried out by the appellant amounts to manufacture in terms of the specific deeming provisions inserted in Note 6 to Chapter IV of the Central Excise Tariff Act - there is no justification for levy of Service Tax on the same consideration. It is seen that the SCN as well as the impugned order has discussed, the leviability of Service tax only. With reference to the provisions, which were in existence prior to 01.07.2012. The adjudicating authority does not appear to have paid attention to the fact that the levy of Service Tax has been shifted to a negative list basis - Even under the new provisions w.e.f. 01.07.2012 we find that the activity undertaken by the appellant is specified under the negative list in Section 66D (f). Consequently, there is no justification for demand of Service Tax even for the period subsequent to 01.07.2012, even though, the relevant Notification No.34/2012-ST dated 20.06.2012 has since been rescinded. Appeal allowed - decided in favor of appellant. 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.