TaxTMI 
TaxTMI 
2008 (8) TMI 72
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....ivity of applying Fusion Bonded Epoxy Coating (FBE Coating) on reinforced steel bars supplied by their customers. Said activity was undertaken by them on job work basis. The bars are received from their customers, who are mainly construction companies like L & T Ltd., Hindustan Construction Ltd. The process of FBE coating undertaken by the appellant is as under: (a) Duty paid bars received from the customers, are cleaned in Short Blasting Machine using steel shot of abrasives. (b) Bars are heated to around 220 to 240 C in induction heater. (c) Epoxy powder is sprayed over the heated bars by Electrostatic Spray guns housed inside the Coating Booth. (d) Epoxy powder on contact with hot bars melts and fuses with the shot blasted heated bar surface making a strong corrosion protection bond with bars. (e) Bars are then cooled in a free flowing water quench tunnel. (f) Thereafter Coated Bars are inspected to check quality of Coating and then dispatched back to the respective customers. The FBE coated bars are returned to their customers and used in civil construction job like construction of dams, bridges, canals, channels, pipelines etc. The said coating is essentially carried ou....
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....ionship between the appellant and the customer is that of principal to principal and not principal and agent. The appellant is not acting as an agent of the principal. Further, are no three party arrangement involve in the present case. Appellant is processing the goods on job work basics which would not come under the category of 'production of good on behalf of the client'. In respect of the above submission, reliance stands placed on Board's Circular No. B2/8/2004-TRU dated 10-9-04. It has further been contended that the said entry was amended with effect from 16-6-05 and the scope was enlarged. Section 65(19) relating to business auxiliary services was amended to read 'production or processing of goods for, or on behalf of the client'. Thus, for the first time, effective from 16th June, 2005, processing of goods on job work basis was sought to be made liable to service tax. Admittedly, on and from the said date, appellant is discharging service tax on the coating activity done on job work basis. In support of the above submission, reliance was made to Board's Circular No. B1/6/2005-TRU., dated 27-7-05 and it was submitted that "when the scope of service....
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....t production has taken place. Similarly, in the present case though pipe remains pipe, which amounts to manufacture but it can certainly be held by the expression 'production'. Further arguing, the learned SDR submits that the appellants were admittedly undertaking activity 'on behalf of the client' inasmuch as they were neither buying nor manufacturing bars nor selling the same but were undertaking activity 'on behalf of the clients'. As such, they are covered by the 'Business Auxiliary Service' definition. Further, the learned SDR submits that the amendment in 2005 expanded the entry by bringing in the 'processing of goods as one of the activities' attracting service tax. This will not make difference, inasmuch as, the appellant's activities are covered by the expression 'production' which was one of the criteria for levy of service tax even before amendment. The expression 'processing' was brought in 2005 so as to cover all processes, which may or may not result in production. As regards the alternative pleas, he leaves the matter to the discretion of the Bench. 6. We have given our careful thought to the submissions m....
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....ng certain produce from natural elements, for example, by growing plants on soil, or by operating mines and the like or for example, by milching the cow etc. It was further observed in p 20 that the word "production" or "produce", when used in juxtaposition with the word "manufacture" takes in bringing into existence new goods by a process which may or may not amount to manufacture. Reliance was further placed by the learned Advocate on Calcutta High Court decision in the case of Commissioner of Income Tax v. Hindustan Metal Refining Works (P) Ltd. - (1981) 128 ITR 472 (Calcutta) in support of his submission that both the words "manufacture" and "production" apply to bringing into existence something which was different from its components and if the activity of epoxy coating has been held as not amounting to manufacture by the Tribunal, the same has to be held as not amounting to production also. In the case of Commissioner of Income Tax v. Sesa Goa Ltd. - (2004) 266 ITR 126, the activity of extracting ore from earth was held falling within the expression "production" and the benefit was extended to the assessee under the Income tax Act. The test of manufacture applied by the Co....
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....ion' of goods in the light of the definition "Business Auxiliary Service". In fact, we may have some insight of the Legislative intent by giving careful thought to the above definition. It seems that legislation was aware of the overlapping of the two expressions 'production' and 'manufacture' and in their wisdom, they have excluded the activities of production of goods which may amount to manufacture within the meaning of Section 2(f) of the Central Excise Act from the said definition. The use of different expression i.e. "production of goods" which may not amount to manufacture, by the Legislature, in its wisdom, only throws light upon the Legislative intent that the 'production' activity which may not be covered by Section 2(f) and may not be liable to pay excise duty in terms of that Act would get covered by the definition of "Business Auxiliary Service". As such, on this point, we do not find any force in the plea of the learned Advocate. 11. It has been further argued before us that as per definition of 'Business Auxiliary Service', production of goods has to be 'on behalf of client'. The expression 'on behalf of client' ne....
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.... per the terms and specifications prescribed by M/s. Maharashtra State Road Development Corporation Ltd. to the main contractors that is M/s. H.C.C. and M/s. L & T, the said contractors shall produce certificate from FBE Coating agencies that the quality of powder epoxy material and other components of FBE conform to relevant I.S. Standard. Such certificates shall accompany each lot of coated bars leaving the plant for work site. The contractor may also carry out such tests at plant jointly or separately of coating agency to confirm use of proper quality of coating material. The coated reinforced bars shall be tested at plant site by the contractor, test results shall be jointly signed by authorized representative of contractor and the coating agency. As such, even if the appellant's plea that the expression 'on behalf of their clients' involves third party agreement is accepted, the same is satisfied in the present case. Admittedly, the contractors have to use powder epoxy coated bars in the construction of roads, bridges etc. Instead of doing the coating themselves the same is being done by the appellants on their behalf. As such, it can be safely concluded that the s....
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....pport of this claim before the jurisdictional Central Excise officer, who shall allow such benefit in accordance with law after verifying the genuineness of the documents has confirmed the demand of duty as proposed in the notice without extending the benefit. We are of the view that there being no dispute about availability of the said benefit, the demand of duty is required to be re-quantified. 16. The appellants have further submitted that the services provided prior to 10-9-04, that is, when the levy of business auxiliary service came into effect are required to be excluded. The Commissioner has denied the benefit on the ground that they have not produced any detail of the same. The demand is required to be re-quantified on this count also. Similarly, the benefit of 'cum-service tax value' in terms of Explanation 2 to Section 67 of the Finance Act, 1994 also does not stand extended to the appellants, which would also affect the re-quantification of demand. In view of the above, we remand the matter to the original adjudicating authority for re-quantification of the demand by extending the above benefit to the appellants. 17. As regards the penalty, the appellants hav....