TaxTMI 
TaxTMI 
2025 (8) TMI 1296
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....d company constituted under Companies Act, 1956, which was subsequently amalgamated with M/s Haldia Petrochemicals Ltd (hereinafter referred to as "HPL/the Appellant") w.e.f. 01.04.2008. The Appellant is engaged in manufacture of various petrochemical products mainly falling under the Chapter 27, 29 and 39 of the Central Excise Tariff Act, 1985, at their integrated factory located at Haldia, West Bengal. HPLCL had set up a Combined Cycle Cogeneration Power Plant at the said facility for generating electricity and steam exclusively for use of HPL. 2.1. In terms of the Power Purchase Agreement ('PPA') dated 10th June 1998, HPL was to supply Naphtha and other utilities as free issue to HPLCL, which would be converted by HPLCL to generate electricity/steam in its power plant and supply it to HPL for exclusive use in its manufacturing facility. The payment for the said job work done by HPLCL, termed as "facilitation charges" was payable monthly and net of any taxes. 2.2. Pursuant to an investigation initiated by DGCEI, Kolkata Zonal Unit around September 2005, a Show cause Notice dated 06.11.2006 was issued on HPLCL demanding service tax on the facilitation charges received by it ....
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....ise, Customs and Service Tax, Bhubaneswar Versus M/s. NTPC SAIL Power Company Pvt. Ltd. [2021 (12) TMI 181 - ORISSA HIGH COURT] ii. Commr. of Central Excise & S. Tax, Ranchi Versus M/s SAIL [2018 (8) TMI 486 - CESTAT KOLKATA] iii. NTPC SAIL Power Co. Pvt. Ltd. Versus Commissioner of C. Ex., Bolpur [2012 (277) E.L.T. 221 (Tri. - Kolkata)] iv. CMS(I) Operations & Maintenance Co. P. Ltd. Versus C.C.E., Pondicherry [2007 (7) S.T.R. 369 (Tri. - Chennai)] [Affirmed by S.C. in 2017 (4) G.S.T.L. J75(S.C.)] v. Orient Paper & Industries Ltd. Vs. Orissa State Electricity Board [1989 (42) ELT 552 (Ori.)]. 3.2. Without prejudice to the above submissions, the Appellant submits that even otherwise, the demand is wholly unsustainable as during the relevant period, clause (v) of Section 65(19) read as "(v) production of goods on behalf of the client". It was only w.e.f. 16.06.2005 when the said clause was amended to read as "(v) production or processing of goods for, or on behalf of, the client". In this regard, the Appellant submits that it is no more res integra that the said amendment was prospective and cannot be given a retrospective effect. Reference in ....
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....s fully aware of the facts of the case. Reliance in this regard is placed on the following judgments: i. M/s Haldia Petrochemicals Ltd. Versus Commissioner of C. Ex., Haldia(supra) ii. M/s Eveready Industries India Ltd. & Ors. Vs. Commissioner of CX, Kolkata I [2025 (3) TMI 496 - CESTAT KOLKATA] iii. M/s Development Consultant Pvt Ltd. vs. Commissioner of ST, Kolkata [2024 (5) TMI 807 - CESTAT KOLKATA] 3.5. In light of the above, the Appellant submits that the demand confirmed in the impugned order is legally not sustainable and deserves to be set aside. 4. The Ld. A.R. reiterated the findings in the impugned order. 5. Heard both sides and perused the appeal documents. 6. In the present case, we find that in terms of the Power Purchase Agreement dated 10th June 1998, HPL was to supply Naphtha and other utilities as free issue to HPLCL, which would be converted by HPLCL to generate electricity/steam in its power plant and supply it to HPL for exclusive use in its manufacturing facility. HPLCL received "facilitation charges" for the work done. In the impugned order service tax has been demanded from HPLCL, under the category of 'Business Aux....
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....e (f) of Section 2 of the Central Excise Act, 1944." As per this definition, any activity involving manufacture of any goods within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 is not subject to tax under the head Business Auxiliary Service. It is a settled position that electricity is goods manufactured in the sense envisaged in clause (f) of Section 2 of the Central Excise Act, 1944. The Hon'ble High Court of Orissa in Orient Paper & Industries Ltd. v. Orissa State Electricity Board (supra), had upheld imposition of Central Excise duty on electricity, electricity being manufactured goods as defined in the Central Excise Act 44. Therefore, we find that the argument of the appellants that the services involved are not liable to tax as Business Auxiliary Service has to be accepted. Such an activity is not covered bys Business Auxiliary Service. 7. Further, we find that this Tribunal in the case of NTPC SAIL Power Co. Pvt. Ltd. (supra), has allowed the appeal filed by the Appellant-Assessee by relying on the earlier decision of the Tribunal in the case of CMS (India) Operations & Maintenance Co. P.Ltd. (supra). The relevant Para 7 of th....
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....the Central Excise Act, 1994. We observe that the activity of 'manufacture' has been specifically excluded from the definition of 'Business Auxiliary Service'. Thus, we hold that generation of electricity being manufacture of goods, cannot be chargeable to service tax under the category of 'Business Auxiliary Service'. 6.4. We also observe that during the relevant period, clause (v) of Section 65(19) read as "(v) production of goods on behalf of the client". It was only w.e.f. 16.06.2005 when the said clause was amended to read as "(v) production or processing of goods for, or on behalf of, the client". Thus, we observe that during the period under dispute, a prerequisite for carrying out production "on behalf of the client" is involvement of three parties namely, (a) the service provider, (b) his client and (c) the client's customer for which the goods are being produced. In the instant case, HPLCL produced power exclusively for supply to HPL only. Since, only two parties were involved in the said transaction, HPLCL cannot be said to have undertaken job work "on behalf of" Appellant. Thus, we hold that the facilitation charges paid by Appella....
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....acture" within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944". 5. As such, as seen from the above reproduced definition of BAS a service provider has to produce the goods on behalf of the client. As such two criterias are required to be satisfied before an activity can be brought under the service tax net falling under the above category. The first criteria relates to the production of goods and the second relates to the fact that such production has to be "on behalf of the client".................... 8. Having appreciated the submissions made by both the sides, we first of all note that there is no dispute on the detailed activity undertaken by the appellant vide which they separate the iron metal from the molten slag. As such we do not feel the need of referring the same, as the dispute does not revolves around the said activity, but relates to as to whether the said activity can be called as "production of goods" and further "on behalf of the client". As regards the expression "production of goods", we note that the same was amended in June 2005 and was substituted by the expression - "processing" of goods. As such it is ....
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....rvice. Amendments have been made to define this taxable activity as 'production or processing of goods for, or on behalf of, the client'. The condition that only such activities would be liable to service tax which do not amount to manufacture under Central Excise Law would, however, continue. 24.2 A point was raised whether 'production of goods on behalf of the client' covers situations where the service provider undertakes job work for the client. In view of the amendment, production or processing (not amounting to manufacture) done either for the client or on behalf of the client would be liable to service tax". 10. Apart from the above circulars of the Board there are decisions of the Tribunal settling the issue at rest. In the case of Auto Coats - 2009 (15) S.T.R. 398 (Tri.-Chen.) it stands held that prior to 16-6-2005 unless a person was engaged by another for processing the goods entrusted by a third person, such activity would not be exigible to service tax. Similarly in the case of Sonic Watches Ltd. - 2011 (21) S.T.R. 34 (Tri.) it was held as under : "5. We find that activity undertaken by the appellants in this case was similar to the one as exist....
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....ation no. 8/2005 dated 01.03.2005. The relevant portion of the decision is reproduced below: "9. Next we consider the liability for the period w.e.f. 16-6-2005. When we consider the definition in sub-clause (v) of Section 65(19) for the period prior to and subsequent to 16-6-2005, we note that for the later period, the definition has included processing of goods in addition to production of goods. The claim of the appellant is that the liability of service tax would stand extinguished through the Notification No. 8/2005-S.T., dated 13-2005. The lower appellate authority has denied the benefit of the said exemption to the appellant. For ready reference, we reproduce below the Notification No. 8/2005-S.T. ibid: "In exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of [production or processing of goods for, or on behalf of, the client] referred in sub-clause (v) of clause (19) of Section 65 of the said Finance Act, from the whole of servic....
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....ufacture of dutiable steel products. Giving due consideration to such end-use certificate submitted by the Public Sector Undertaking, we are of the view that the appellant will be entitled to the benefit of Notification No. 8/2005, dated 1-3-2005. Consequently, we set aside the demand for service tax made in the impugned order and allow the appeal. 9. With regard to the demand raised on shifting, transportation, loading and unloading from one place to another inside the steel plant of the client itself, the Tribunal in their own case as reported in 2014 (1) TMI 1051- CESTAT-New Delhi has observed that :- "7. In any case, we have seen the decision of the Tribunal as upheld by Hon'ble High Court in the case of Modi Construction Co. vs. CCE, Ranchi (supra), it stands clearly held by the Tribunal that service of shifting, transportation or raw materials, waste materials, and finished products from one place to another, inside the plant itself, does not fall under the taxing category of Cargo Handling Services. The activities undertaken by the appellant are admittedly within the plant itself. As such, we find that the ratio of the law declared by he Tribunal in t....