2021 (3) TMI 713 - AT - Service Tax

Court Partially Allows Appeals, Recognizes Manufacturing, Grants Partial Tax Benefit; Insufficient Evidence Denies Full Relief.

The Division Bench partially allowed the appeals, recognizing the appellant's activities as 'manufacture' and confirming the benefit under Notification ... Manufacture or service - Business Auxiliary services or not - processing of goods involving the activity of fabrication of tower parts including shearing, punching, numbering, cutting, notching, marking drilling, debarring and getting inspection through QA on raw materials/ inputs, purchased and supplied by L&T - benefits provided under N/N. 08/2005-ST dated March 01, 2005 and 25/2012 (ST) dated June 20, 2012 - HELD THAT:- The issue involved in these appeals, is squarely covered by the decision by a Division Bench of this Tribunal in Anil Kumar vs. Commissioner of Central Excise and Service Tax, Bhopal [2018 (8) TMI 253 - CESTAT NEW DELHI] where it was held that we partly allow the appeal holding the impugned activity to be the one as that of manufacture. Benefit of Notification No.08/2005 of 1st March, 2005, is confirmed, however, denying the benefit of Notification No. 06/2005 dated 01.03.2005. The activity carried out by the appellant is that of “manufacture”. The benefit of Notification No. 08/2005 dated March 01, 2005, is confirmed but the benefit of Notification No. 06 of 2005 dated March 01, 2005 is denied - Appeal allowed in part. Issues:- Whether service tax is leviable on the services provided by the appellant to M/s. L&T Ltd.- Whether the appellant is entitled to avail the benefits provided under Notification No. 08/2005-ST dated March 01, 2005 and 25/2012 (ST) dated June 20, 2012.Analysis:Issue 1: Service Tax LeviabilityThe appellants, house labour contractors engaged in processing goods for M/s. Larsen and Toubro Ltd. (L&T), argued that their activities fall under 'business auxiliary service' as per the Finance Act, 1994. The Commissioner (Appeals) determined that the activity of processing goods for the client qualifies as taxable under business auxiliary service and not as 'manufacture' under the Central Excise Act, 1944. It was noted that service tax would be applicable to such services. Additionally, the Commissioner clarified that for the benefit of Notification No. 08/2005 to apply, the client must pay appropriate duty of central excise on the resultant goods. In this case, as M/s. L&T cleared goods without paying the required duty of excise, the appellant was deemed ineligible for the benefits under the notification.Issue 2: Benefit of NotificationsThe Division Bench referred to a previous decision where it was held that the activities of the appellants amounted to manufacturing. However, the appellants failed to provide evidence of the aggregate value of taxable services, leading to the denial of benefits under Notification No. 6/2005. The Division Bench upheld the denial of benefits under both Notification No. 6/2005 and No. 08/2005-ST, as the appellants did not meet the necessary criteria. Consequently, the appeals were partially allowed, recognizing the activity as 'manufacture' and confirming the benefit under Notification No. 08/2005 while denying the benefit under Notification No. 06/2005. The impugned orders were set aside partially based on the Division Bench's decision.In conclusion, the judgment addressed the issues of service tax leviability and the entitlement to notification benefits. It clarified the tax implications of the services provided by the appellant to M/s. L&T and the conditions for availing specific notifications. The decision was based on the interpretation of relevant provisions and previous rulings, ultimately allowing the appeals in part and setting aside the orders to a certain extent in line with the Division Bench's decision.