Tribunal rules small industry not liable for service tax on steam generation; appeal allowed

The Tribunal ruled in favor of the appellant, a small scale industry unit, stating they were not liable to pay service tax on activities involving steam generation. The appellant's use of steam generating units did not qualify as business auxiliary service before a specific date, leading to the unsustainable demand for service tax. The impugned order demanding service tax was set aside, and the appeal was allowed with any necessary consequential relief.

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Issues involved: Applicability of service tax on activities involving steam generation and interpretation of business auxiliary service.

For the first issue, the appellant, a small scale industry unit, was awarded a contract by ONGC for hiring steam generating units. The appellant installed and operated the units for various tasks specified in the agreement. The central issue was whether the activity of steam generation amounted to manufacture under section 2(f) of the Central Excise Act, 1944, and whether service tax was applicable. The appellant, availing SSI Exemption, did not obtain central excise registration during the relevant period. A notice demanding service tax was served, leading to the current appeal.

Regarding the interpretation of business auxiliary service, the Tribunal referred to a previous case involving crane hire services provided to ONGC. In that case, it was held that the activities did not fall under business auxiliary service prior to a specific date. Applying the same reasoning to the present case, the Tribunal found that the appellant's activities using the steam generating unit did not qualify as business auxiliary service before a certain date. Therefore, the demand of service tax under this category was deemed unsustainable.

In conclusion, the Tribunal ruled in favor of the appellant, stating that they were not liable to pay service tax on their activities involving the steam generating unit. The impugned order demanding service tax was set aside, and the appeal was allowed with any consequential relief deemed necessary.

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