Excel Industries vs. Commissioner of GST and Central Excise - (Customs, Excise and Service Tax Appellate Tribunal) (27 May 2024)

Activity of cutting, shearing, welding etc., on the goods amounts to manufacturing and therefore, cannot be taxed under Business Auxiliary Services

MANU/CC/0166/2024

Service Tax

In present case, the Appellant is engaged in undertaking job work in the nature of bending, cutting, shearing and punching on goods fabricated / manufactured for power plant by their various customer industries. The Department was of the view that, the Appellant has to pay Service Tax for the activities undertaken by them under Business Auxiliary Services (BAS). Show Cause Notice was issued for the period from October 2006 to September 2011 proposing to demand Service Tax under the category of BAS on the labour charges collected by the appellant for under taking the above activities.

After due process of law, the Original Authority confirmed the demand of Service Tax along with interest and imposed penalties. On appeal, the Commissioner (Appeals) upheld the same. The issue to be decided is whether the appellant is liable to pay service tax on the labour charges (job work charges) collected by them for undertaking the activity of cutting, shearing, welding etc., on the goods.

The definition of BAS under Section 65(19) of Finance Act, 1994 excludes any activity that amounts to manufacture of excisable goods. In the present case, the supply of raw materials as well as clearing of worked goods are undertaken by the Appellant by giving declaration as per Notification No. 214/86-CE. Thus, the onus to pay excise duty is on the principal manufacturer.

The Tribunal in the case of Pioneer Engineering Industries vs. Commissioner of Customs, Central Excise & Service Tax had considered the very same issue and held that, the activity undertaken by the assessee in the nature of cutting, punching, drilling, heat treatment on steel plates so as to send the products to BHEL would amount to manufacture. The Tribunal had relied upon the decision of the Hon'ble Supreme Court in the case of Orissa Bridge & Construction Corpn. Ltd. Vs. Commissioner of Central Excise, Bhubaneswar, to hold that such activity amounts to manufacture.

Following the decision of the Tribunal in the case of Pioneer Engineering Industries, present Tribunal is of the considered opinion that, the activity amounts to manufacture. The Commissioner (Appeals) for the subsequent period has set aside the demand of service tax observing that, the activity amounts to manufacture of excisable goods. In view thereof, the demand cannot sustain. The impugned order is set aside. Appeal allowed.

Tags : DEMAND CONFIRMATION LEGALITY