Steel strip supplier's strapping services at buyer premises qualify as exempt job work under Notification 8/2005

CESTAT Kolkata held that strapping services provided by appellant to steel manufacturers constituted job work exempt under Notification No. 8/2005 dated 01/03/2005, not taxable business auxiliary services. The appellant supplied steel strips on excise duty payment, then contracted to strap steel rolls at buyers' premises for service charges. Since ultimate goods were cleared by clients paying excise duty, the activity qualified for exemption. Extended period demand was set aside due to limitation as appellant bonafidely believed exemption applied and regularly filed returns. Appeal allowed.

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Issues: The issues involved in the judgment are whether the services rendered by the Appellant firms fall under the category of "Business Auxiliary Service" and whether the Appellant is liable to pay Service Tax for the job work undertaken.

Summary:

Issue 1: Classification of Services as "Business Auxiliary Service"

The Appellant contended that the activity of strapping steel rolls amounts to manufacturing under Section 2(f) of the CEA 1944. They argued that under "Business Auxiliary Service (BAS)," the activity is exempted from Service Tax if it amounts to manufacturing. Additionally, they relied on Notification No.8/2005 to support their claim that no Service Tax is required to be paid. The Appellant cited a previous case before CESTAT, Hyderabad, where it was held that no Service Tax is liable for similar job work activities. The Tribunal found that the Appellant's job work activity is covered by the exemption under Notification No. 8/2005 and allowed the Appeal on merits.

Issue 2: Liability to Pay Service Tax

The Adjudicating Authority confirmed the demand for Service Tax, stating that the Appellant failed to pay Service Tax on the service charges received from clients for job work. The Appellant argued that since the Excise Duty was paid by the steel manufacturers after strapping, they were covered by the exemption under Notification No. 8/2005. The Tribunal agreed with the Appellant, stating that the Appellant's activity of strapping steel rolls for clients, using materials supplied by the clients, falls under the exemption and thus, no Service Tax is leviable. The Tribunal also set aside the confirmed demand for the extended period on account of limitation.

In conclusion, the Tribunal allowed the Appeal on merits, finding that the Appellant's job work activity is exempt from Service Tax under Notification No. 8/2005. The Tribunal also held that the Appellant cannot be held liable for the confirmed demand for the extended period due to their bonafide belief in compliance with the exemption notification.

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