The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the activity of electroplating amounts to manufacture and service tax is not payable.
Daljeet Singh Versus, the assessee appellant is in the business of electroplating filter components of motor vehicles on a job-based basis for various manufacturers of auto parts. The appellant was collecting job charges and paying the applicable VAT on the materials used by them in the job. The Department thought that the activity performed by the appellants amounted to “business auxiliary service” as per Section 65(19) of the Finance Act, 1994.
A show cause notice was issued to the appellants for recovering service tax along with interest and penalties and to appropriate service tax paid by the appellants during the period 01.12.2006 to 31.03.2007. The proposals in the Show Cause Notice were confirmed. On an appeal filed by the appellant, the Commissioner (Appeals) upheld the order of the original authority.
The assessee contended that the activity of electroplating undertaken by the appellants amounts to manufacture in terms of Section 2F of the Central Excise Act, 1944, and Section Notes to Section 16 of the Central Excise Tariff Act, 1985.
The tribunal held that as the activity of electroplating amounts to manufacture and service tax is not payable. The two member bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that electroplating of electrical contacts by the appellant amounts to manufacture and viewed that if the process amounts to manufacture, no service tax would be liable to be paid.
While allowing the appeal, the CESTAT set aside the order.
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