2023 (9) TMI 657 - AT - Service Tax

Tribunal rules welding and fabrication for ship manufacture not subject to service tax

The Tribunal upheld the Commissioner's decision that the respondent's activities, including welding and fabrication for ship manufacture, constitute ... Business Auxiliary Service - Activity amounting to manufacture or not - welding, fabrication, cutting, binding and other related activities on job work basis in respect of manufacture of ship - activity is provision of service under the category of Business Auxiliary Service - HELD THAT:- As per the facts of the case, the respondent have undertaken the job of various activities such as welding, fabrication, cutting, binding and other related activities for the purpose of manufacture of ship on behalf of M/s L&T. The learned Commissioner (Appeals) after detailed analysis came to the conclusion that the appellant’s activity is amount to manufacture of excisable goods, therefore, the same is excluded from the definition of Business Auxiliary Service, hence not liable to service tax. After close analysis of section 2 (f) and definition of Business Auxiliary Service, and also relying on the various judgments, the learned Commissioner (Appeals) has come to the conclusion that the activity of the appellant is indeed an activity amounts to manufacture in terms of Section 2(f) which is excluded from the definition of Business Auxiliary Service as well as in the Notification No. 8/2005-ST. Therefore, the finding of the learned Commissioner (Appeals) is convincing and there are no infirmity therein. It appears that the contention of the Revenue is that even though the same activity though amounts to manufacture but since M/s L&T is the manufacturer, the appellant is a service provider for the same activity - as per the exclusion provided in the definition of Business Auxiliary Service, the activity is not a person specific but the activity specific, therefore, if the activities of welding, fabrication, cutting, binding and other related activities amount to manufacture even if M/s L&T is a manufacturer but the activities per se is manufacturing activity irrespective of the ownership of the goods or M/s L&T being a manufacturer, the respondent who carried out such activity which is otherwise a manufacturing activity in terms of Section 2(f) merely because M/s L&T is a manufacturer will not fall under the definition of BAS because the Business Auxiliary Service excludes only the activity of manufacturing not related to manufacturer, therefore, the Revenue’s ground on this aspect also not affected the concluding finding of the learned Commissioner (Appeals) in the impugned order. The impugned order is legal and proper which does not require any interference - Appeal of Revenue dismissed. Issues Involved:1. Whether the activities performed by the respondent amount to manufacture under Section 2(f) of the Central Excise Act, 1944.2. Whether the activities fall under the definition of Business Auxiliary Service (BAS) and are liable for service tax.3. Applicability of Notification No. 8/2005-ST.Summary:1. Manufacture under Section 2(f) of the Central Excise Act, 1944:The learned Commissioner (Appeals) concluded that the activities such as welding, fabrication, cutting, and binding carried out by the respondent for the manufacture of ships on behalf of M/s L&T Ltd. amount to manufacture of excisable goods under Section 2(f) of the Central Excise Act, 1944. The Commissioner noted that these processes are incidental or ancillary to the completion of the manufactured product and thus fit within the definition of 'manufacture'. The decision was supported by the Supreme Court's ruling in M/s. Grasim Industries Ltd. vs. UOI and other relevant case laws.2. Definition of Business Auxiliary Service (BAS) and Service Tax Liability:The Commissioner (Appeals) held that since the activities amount to manufacture, they are excluded from the definition of BAS, which means they are not liable for service tax under this category. The definition of BAS explicitly excludes any activity that amounts to the manufacture of excisable goods. The Tribunal upheld this view, stating that the activity is specific and not person-specific. Therefore, even if M/s L&T is considered the manufacturer, the respondent's activities still qualify as manufacturing and do not fall under BAS.3. Applicability of Notification No. 8/2005-ST:The Commissioner (Appeals) observed that Notification No. 8/2005-ST does not apply because the activities performed by the respondent amount to manufacture. The notification's explanation (i) states that it applies only when the production does not amount to manufacture under Section 2(f) of the Central Excise Act, 1944. The Tribunal agreed with this interpretation, noting that the activities are manufacturing and thus the notification is not applicable.Conclusion:The Tribunal found the Commissioner's order to be legally sound and upheld it, dismissing the Revenue's appeal. It was concluded that the activities carried out by the respondent are manufacturing activities under Section 2(f) and are excluded from BAS, thereby not attracting service tax. The Tribunal also clarified that the exclusion in BAS is activity-specific, not person-specific, reinforcing that the respondent's activities do not fall under BAS even if M/s L&T is the manufacturer.Order:The appeal by the Revenue was dismissed, and the order of the Commissioner (Appeals) was upheld. The judgment was pronounced in the open court on 13.09.2023.