2019 (5) TMI 1229 - AT - Service Tax

Tribunal rules services not taxable under business auxiliary services; clarifies distinction between processing and producing goods.

CCCE, Hyderabad – III Versus Oil Country Tubular Ltd.

CCCE, Hyderabad – III Versus Oil Country Tubular Ltd. - 2019 (24) G.S.T.L. 612 (Tri - Hyd.) Issues:- Interpretation of the definition of business auxiliary services prior to and post 16.06.2005.- Whether the job work undertaken by the respondent amounts to production of goods as per Sec.65 (105) (zzb) of the Finance Act, 1994.- Liability to pay service tax under the head of business auxiliary services for the period pre and post 16.06.2005.Analysis:1. Interpretation of the definition of business auxiliary services: The dispute revolved around the interpretation of the definition of business auxiliary services both before and after 16.06.2005. The appellant argued that the term 'on behalf of the client' implies the presence of a third party arrangement, which was refuted by the adjudicating authority and the Commissioner (Appeals). The Tribunal noted that a plain reading of the definition of business auxiliary services does not necessitate the involvement of a third party for service tax liability.2. Job work and production of goods: The core issue was whether the job work undertaken by the respondent amounted to the production of goods as per Sec.65 (105) (zzb) of the Finance Act, 1994. The appellant contended that the processes carried out by the respondent on raw materials supplied by their clients did not constitute manufacturing under Sec.2(f) of the Central Excise Act, 1944. The Tribunal observed that the respondent provided services for the client and not on behalf of the client to a third party. Additionally, the scope of work undertaken by the respondent indicated that they primarily processed goods and did not engage in the production of goods.3. Liability for service tax: The question of liability to pay service tax under the head of business auxiliary services for the period pre and post 16.06.2005 was crucial. The lower authorities found that the services provided by the respondent were not exigible to service tax during the relevant period as they were not producing goods on behalf of the client to a third party. The Tribunal concurred with this finding and upheld the decision that the demands for service tax were not sustainable for the period in question.In conclusion, the Tribunal rejected the appeal by the revenue and upheld the impugned order, emphasizing that the services provided by the respondent did not fall under the category of business auxiliary services liable for service tax. The judgment clarified the interpretation of the relevant legal provisions and highlighted the distinction between processing goods for clients and producing goods on behalf of clients to third parties, leading to the dismissal of the revenue's appeal.