2019 (1) TMI 714 - AT - Service Tax

Tribunal rules in favor of appellant on service tax demand for scrap melting, upholds commission tax.

M/s Atul Engineering Udyog Versus Commissioner (Appeals), Customs & C.E., Kanpur

M/s Atul Engineering Udyog Versus Commissioner (Appeals), Customs & C.E., Kanpur - TMI Issues:1. Whether the service tax and penalty confirmed against the appellant for providing Business Auxiliary Services is justified.2. Whether the activity of melting scrap by electric furnace amounts to manufacture.3. Whether the service tax confirmed against the appellant for commission earned on trading of commodities is justified.4. Whether the penalty imposed on the appellant for the commission earned on trading of commodities should be set aside.Analysis:1. The judgment addresses the issue of service tax and penalty confirmed against the appellant for providing Business Auxiliary Services. The Tribunal found that the appellant's activity of melting scrap resulted in the emergence of molten metal used for CI Castings, which were returned to the principal manufacturers. The appellant argued that the activity was done under the cover of challans issued under Notification No.214/86-CE. The Tribunal disagreed with the Revenue's contention, stating that the conversion of waste into casting amounts to manufacture. Consequently, the demand for service tax and penalty of Rs. 6,72,122/- was set aside.2. The judgment also delves into whether the activity of melting scrap by electric furnace amounts to manufacture. The Commissioner (Appeals) had held that the melting of scrap did not amount to manufacture. However, the Tribunal disagreed, pointing out that M.S. Castings were indeed emerging in the appellant's factory. The Tribunal noted that the goods were being returned under the cover of Notification No.214/86-CE challans, indicating manufacturing activity. As a result, the Tribunal set aside the demand for service tax and penalty related to this issue.3. Regarding the service tax confirmed against the appellant for commission earned on trading of commodities, the appellant admitted that the tax was required to be paid. The appellant had already deposited the amount but contested the penalty, citing a legal interpretation issue. The Tribunal upheld the demand of Rs. 17,670/- along with interest, as it was not contested. However, the Tribunal set aside the penalty imposed on the grounds that the law during the relevant period was unclear, allowing for a bona fide belief that the transactions were not taxable.4. In conclusion, the Tribunal partially allowed the appeal and partially rejected it. The judgment highlights the importance of legal interpretation, the definition of manufacture, and the nuances of tax liabilities in the context of business activities.