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 the work resulted in manufacture of excisable goods; such services therefore fall under the exemption at Sl. No. 30(c) of Notification No. 25/2012 and the service tax demand on those services was set aside. Separately, the tribunal found no evidence of concealment or intent to evade tax and declined to invoke the extended period of limitation; accordingly the extended-period demand, and consequential interest and penalty, were also quashed. Appeal allowed with consequential relief.

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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.

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