2026 (2) TMI 431 - AT - Service Tax

Job work exemption for manpower-supplied services in manufacturing upheld, extended limitation and penalty demands quashed

Services characterised as supply of labour/manpower were held to constitute job work/fabrication when labour worked within the manufacturing premises and ... Negative List of Services - job work - exemption under Notification No. 25/2012-S.T., Sl. No. 30(c) - manpower supply services - service tax liability - extended period of limitation - interest and penalty u/s 78 - HELD THAT:- We find that during the impugned period, the appellant was engaged in providing different services to the service recipient viz., M/s. Exide Industries Ltd., against different work orders were awarded to them. As far as the first type of work orders are concerned, for which services were rendered by way of supply of labour / manpower, against which bills were raised on per-day / per-hour basis, in the form of daily paid canteen workers, dispatch of company documents as courier boy, fixing stickers in bottles, etc., the appellant has admitted their liability to Service Tax under the category of manpower supply services and claims to have discharged their Service Tax liability in this regard. We find that the labourers were engaged directly in the process of manufacture of battery by M/s. Exide Industries Ltd and the consideration was fixed on the basis of work accomplished by counting in ‘piece’. Hence, we agree with the submission of the appellant that such services were provided by way of carrying out job work / fabrication for manufacture of excisable goods in the premises of M/s. Exide Industries Limited. As the activity undertaken by the appellant resulted in ‘manufacture’ of excisable goods, on which M/s. Exide Industries Limited has discharged Service Tax, we are of the view that such services are exempted from payment of Service Tax. We find that the above activity undertaken by the appellant is squarely covered within the ambit of Sl. No. 30(c) of Notification No. 25/2012-S.T. dated 20.06.2012. Accordingly, we find that the demand of Service Tax confirmed in the impugned order, on the above services rendered by the appellant, is not sustainable, on merits. Limitation - We find that the appellant were regular in filing their ST-3 Returns and that the impugned demand has been raised solely on the basis of the difference found between the Income Tax Return (ITR) and Service Tax Return (ST-3) filed by them for the Financial Year 2014-15. As the appellant have not suppressed any material fact from the Department, we observe that the intent to evade payment of Service Tax has not been established in this case. In the absence of any evidence to the contrary, we are of the view that the ingredients for invoking the extended period of limitation are not satisfied in this case. Accordingly, we hold that the confirmation of the said demand by invoking the extended period of limitation is not sustainable. Thus, we hold that the demand confirmed in the impugned order is not sustainable, on merits as well as on limitation and hence, the same is set aside. Since the impugned demand against the appellant cannot be sustained, the question of demanding interest or imposing penalty thereon under Section 78 of the Act does not arise. Accordingly, the said demands are also set aside. In the result, the appeal filed by the appellant is allowed, with consequential relief, if any, as per law. Issues: (i) Whether the services rendered by the appellant in undertaking fabrication/job work on materials supplied by the principal constitute job work exempt from service tax under Notification No. 25/2012-S.T. dated 20.06.2012 read with Section 66D/Section 66B of the Finance Act, 1994; (ii) Whether the invoking of the extended period of limitation for recovery of service tax is justified in absence of intent to evade.Issue (i): Whether the services rendered by the appellant are classifiable as job work and exempt under Notification No. 25/2012-S.T. dated 20.06.2012.Analysis: The appellant performed fabrication/job work on materials supplied by the principal manufacturer at the principal's premises, with labour engaged directly in the manufacturing process and consideration fixed on per-piece basis. The Tribunal examined the nature of the activity against Sl. No. 30(c) of Notification No. 25/2012-S.T. dated 20.06.2012 and the Negative List concept under Section 66D and the exemption provision under Section 66B of the Finance Act, 1994.Conclusion: The services are held to be job work falling within Sl. No. 30(c) of Notification No. 25/2012-S.T. dated 20.06.2012 and are exempt from service tax. The conclusion is in favour of the assessee.Issue (ii): Whether the extended period of limitation can be invoked where there is no evidence of suppression or intent to evade payment of service tax.Analysis: The Tribunal noted that the appellant regularly filed ST-3 returns and the demand arose from differences between ITR and ST-3 figures. There was no evidence establishing suppression of facts or intent to evade payment of service tax, facts necessary to invoke the extended period of limitation under the relevant law.Conclusion: The invocation of the extended period of limitation is not justified in the absence of evidence of intent to evade; this conclusion is in favour of the assessee.Final Conclusion: The demand confirmed in the impugned order is not sustainable both on merits (services are exempt as job work under Notification No. 25/2012-S.T. dated 20.06.2012 read with Section 66D/66B of the Finance Act, 1994) and on limitation (extended period not invocable for lack of intent to evade); consequential demands of interest and penalty under Section 78 of the Finance Act, 1994 also do not arise. The appeal is allowed.Ratio Decidendi: Services consisting of fabrication/job work performed on materials supplied by the principal, directly contributing to manufacture at the principal's premises with consideration on per-piece basis, fall within Sl. No. 30(c) of Notification No. 25/2012-S.T. dated 20.06.2012 and are exempt from service tax; further, the extended period of limitation for service tax recovery requires proof of suppression or intent to evade which was not established.