Job-work sterilization exemption upheld for packed goods treated as semi-finished goods under the service tax notification.

Sterilization of packed goods received on job-work could fall within Notification No. 8/2005-S.T. because the exemption was not limited to raw materials alone; packed goods treated as semi-finished goods were covered where production or processing was done on behalf of a client and the goods were returned for use in manufacture. The notification's explanation showed that the process need only complete part or whole of production, and a subsequent manufacture by the client was not a necessary condition. The Board clarification dealt with taxability of the service, not exemption eligibility, so it did not defeat the claim. The service tax demand was therefore not sustainable.

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Issues: Whether the appellant was entitled to exemption under Notification No. 8/2005-S.T. for sterilization of packed goods received from clients on job-work basis, and whether the demand of service tax was sustainable.

Analysis: The taxable entry covered production or processing of goods on behalf of a client under Business Auxiliary Service, but the exemption notification applied where goods were produced using raw materials or semi-finished goods supplied by the client and returned for use in or in relation to manufacture of other goods. Packed goods received for sterilization were treated as semi-finished goods, so the notification was not confined only to raw materials. The notification also explained that production of goods meant working upon raw materials or semi-finished goods to complete part or whole of production, subject to the process not amounting to manufacture. On that construction, further manufacture by the client was not a necessary condition. The Board clarification addressed taxability of the service, not eligibility to the exemption, and therefore did not assist the Revenue.

Conclusion: The appellant was entitled to the benefit of Notification No. 8/2005-S.T. and the demand was not sustainable.

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