Denial of Service Tax Exemption: CESTAT Grants Exemption for Powder Coating Activity [Read Order]
The assessee had challenged the Adjudicating Authority’s decision, which classified the powder coating activity under Business Auxiliary Service (BAS) and denied the exemption, citing that the activity did not qualify as 'manufacture' under Section 2(f) of the Central Excise Act, 1944
![Denial of Service Tax Exemption: CESTAT Grants Exemption for Powder Coating Activity [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/CESTAT-CESTAT-Chennai-Service-Tax-Exemption-Exemption-for-Powder-Coating-Activity-TAXSCAN.jpg "Denial of Service Tax Exemption: CESTAT Grants Exemption for Powder Coating Activity [Read Order]")
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted exemption to the assessee for its powder coating activity, setting aside the denial of service tax exemption under Notification No. 8/2005-ST and ruling that the activity was not taxable under Business Auxiliary Service (BAS). Trident Coatings Pvt. Ltd.,appellant-assessee,challenged the denial...
The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted exemption to the assessee for its powder coating activity, setting aside the denial of service tax exemption under Notification No. 8/2005-ST and ruling that the activity was not taxable under Business Auxiliary Service (BAS).
Trident Coatings Pvt. Ltd.,appellant-assessee,challenged the denial of exemption and demanded the service tax.
The case was heard by Ms. Swetha R.S., the assessee's counsel and Shri Anoop Singh, the Revenue's Joint Commissioner. After reviewing the arguments, documents, and rulings, the main issue was whether the service tax demand was justified.
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In Order-in-Original No. 63/2012 dated 16.10.2012, the Adjudicating Authority(AA) ruled that the appellant’s powder coating activity did not qualify as 'manufacture' under Section 2(f) of the Central Excise Act, 1944. As a result, the activity was classified under BAS, and the service tax exemption under Notification No. 8/2005-ST was denied.
The assessee had submitted permission letters for job work, as the principals were SEZ units, but the AA failed to consider these letters, which outlined the purpose and identified the entities for outsourcing the work.
Notification No. 8/2005 required that goods sent for job work should be used in making goods that attract duty. The assessee claimed it did the job work as instructed by the SEZ units, and there was no dispute about the work or payment. It was also not disputed that the SEZ units used the processed goods in products that were subject to duty.
The assessee sought the benefit of Notification No. 8/2005, but the AA wrongly referred to Notification No. 4/2004-ST and denied the benefit. The Commissioner (Appeals) also doubted the delivery of goods to the SEZ units, even though the assessee claimed delivery, the SEZ units didn’t dispute it, and payment was made by cheque. Since the AA accepted the delivery and no appeal was made by the Revenue, the impugned order was unfair and violated natural justice.
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The two member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) decided that the assessee was entitled to the exemption under Notification No. 8/2005 and that the activity was not taxable under BAS. This was supported by several judicial rulings. As a result, the impugned order was set aside.
In short,the appeal filed by the assessee was allowed.
To Read the full text of the Order CLICK HERE
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