2025 (12) TMI 98 - AT - Service Tax

Battery job-work held manufacture; no service tax, refund issues under Section 11B remanded for fresh decision

CESTAT Chandigarh held that the appellant's job-work activity of filling dry batteries with electrolyte, charging, checking, drying and washing amounts to ... Levy of service tax - job-work - process of filling dry batteries with electrolyte, charging, checking, drying and washing - process amounting to manufacture or not - applicability of principles of natural justice - time limitation - HELD THAT:- The issue is no longer res integra as far as holding that the process undertaken by the appellants amount to manufacture and therefore, service tax is not payable, in view of the decision of the Tribunal in the case of Exide industries [2016 (2) TMI 591 - CESTAT NEW DELHI], the decision of this Bench in the case of Eliza Power [2025 (10) TMI 733 - CESTAT CHANDIGARH] and the CBEC Circular F.No. 4/3/2006-CX. dated 16.06.2006 . Therefore, there are no hesitation, whatsoever, in holding that the issue is covered in favor of the appellants as far as the merits are concerned. Both learned Counsel for the appellants and the learned Authorized Representative for the Revenue put forth their respective submissions regarding limitation under Section 11B of Central Excise Act for filing an application for refund and on unjust enrichment. However, the impugned orders restricted themselves to the merits of the case and have not given any findings on the issue of limitation to file refund claim and unjust enrichment. Under the circumstances, it would not be prudent for this Bench, being an appellate forum, to decide the issue at this level. Therefore, it would be in the interest of justice to remand the matter back to the original authority to decide the claim of the appellant on these issues, taking into account the records of the case, the submission of the appellant and the jurisprudence. Both the appeals are partly allowed as far as merits are concerned i.e. holding that the process undertaken by the appellants amount to manufacture - appeals remanded to the original authority. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the process of filling dry batteries with electrolyte, charging, checking, drying and washing amounts to 'manufacture' under the Central Excise Tariff, thereby rendering service tax not payable on such activity. 1.2 Whether questions relating to limitation under Section 11B of the Central Excise Act, 1944 and unjust enrichment in respect of the refund claims could be decided at the appellate stage or should be remanded to the original authority for fresh adjudication. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether the battery processing activity amounts to 'manufacture' and service tax is not payable Interpretation and reasoning 2.1 The Tribunal noted that the appellants receive dry batteries, fill them with electrolytic liquid, connect them to charging points, charge them, check liquid levels, dry and wash the batteries, and then clear them. 2.2 The Tribunal relied upon Note 6 to Section XVI of the Central Excise Tariff Act (as invoked by the appellants) and the precedent of the Tribunal in the case dealing with similar processes in relation to batteries (Exide Industries), as well as a decision of the same Bench in a matter involving an identical process (Eliza Power Industries). 2.3 The Tribunal also took into account a CBEC Circular which clarified that such processes undertaken on batteries amount to 'manufacture'. These authorities were considered sufficient to hold that the controversy was no longer res integra and that the legal position stood settled. Conclusions 2.4 The Tribunal held that the process undertaken by the appellants amounts to 'manufacture' and, consequently, service tax was not payable on the said activity. On merits, the appeals were allowed to this extent and the impugned orders were set aside insofar as they held that the process did not amount to manufacture and denied refund on that basis. Issue 2: Adjudication of limitation under Section 11B and unjust enrichment, and propriety of remand Legal framework (as discussed) 2.5 The Tribunal recorded that both sides addressed arguments on (a) applicability of limitation under Section 11B of the Central Excise Act, 1944 to the refund of service tax, and (b) the bar of unjust enrichment, including reliance by the Department on a Tribunal decision holding Section 11B applicable to such refunds. Interpretation and reasoning 2.6 The Tribunal observed that the adjudicating authority and the appellate authority had confined their decisions to the question whether the activity amounted to manufacture and had not rendered any findings on limitation under Section 11B or on unjust enrichment in relation to the refund claims. 2.7 Being an appellate forum, the Tribunal considered it inappropriate to decide these questions in the first instance without any findings of fact or reasoning from the original authority on these specific aspects. It considered that a proper adjudication required examination of the records, invoices, and supporting evidence concerning passing on of the tax burden and the timeliness of the claims. Conclusions 2.8 The Tribunal declined to decide the issues of limitation under Section 11B and unjust enrichment at the appellate stage and remanded the matter to the original authority to examine and decide these issues afresh, in light of the records, submissions of the appellants, and applicable jurisprudence, while proceeding on the settled position that the process amounts to manufacture and service tax was not payable.