The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and observed that activity of fabrication of tugs and barges out of raw material not to be classified under Manpower Recruitment or Supply Agency Service.
The appellant, Dosti Fabricators, is primarily engaged in the fabrication of tugs and barges out of raw material like steel plates etc supplied by the clients. Fabrication charge is paid to the appellant on lumpsum or per ton basis. The case of the department is that the contract between the appellant and their client is for supply of labour therefore, the activity of the appellant falls under the category of Manpower Recruitment or Supply Agency Service hence, the same is taxable.
The counsel for the appellant, Vikash Mehta, submitted that the activity of the appellant is of manufacturing which is evident from the undisputed fact that with effect from 01.03.2011, Central Excise duty was levied on the manufacture of tugs and barges. The appellant took Central Excise registration and paid Central Excise duty during the years 2011-12 and 2012-13 respectively. This also shows that the activity is not of supply of manpower but of manufacturing.
Rajesh Nathan, Assistant Commissioner, (AR), who appeared on behalf of the Revenue reiterates the findings of the impugned order
A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “We also find that appellant have also argued that from 01.03.2011, Central Excise duty was levied on the manufacturing of tugs and barges and the appellants have started paying excise duty on the same activity. This further reinforce the claim of the appellant that the activity of fabrication of barges is a manufacturing activity and the appellant are indeed a manufacturer. If the contention of the Revenue is assumed to be correct then the appellant cannot be treated as manufacturer but in such case, their client shall be held as manufacturer which is not a case here.”
“As per our above discussion and findings the entire service tax demand (except the demand of service tax of Rs. 1,05,12,549/-) in respect of repair service) is not sustainable, hence the same is set-aside. The impugned orders are modified to the above extent” the Tribunal noted.
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