In the recent ruling,the Ahmedabad bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) granted relief to Afflatus Gravures Pvt Ltd by upholding the Service Tax exemption for their essential chrome plating process.
Afflatus Gravures Pvt Ltd,the appellant-assesse, carried out chrome plating on gravure printing cylinders through an electroplating process and collected job charges from manufacturers. These manufacturers used the chrome-plated cylinders as capital goods in their printing machinery without paying Central Excise duty. The department believed the appellant was liable for Service Tax under the category of Business Auxiliary Service for the job work done.
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Show cause notices dated 07.06.2017 and 23.07.2018 were issued to the appellant demanding Service Tax on the job charges collected. The notices were adjudicated, and the total demand was confirmed along with interest. A penalty was imposed under Section 78(1) of the Finance Act, 1994, with an option for reduced penalty if paid within 30 days. A further penalty was imposed under Section 77(2) of the Finance Act, 1994.
The appellant filed appeals with the Commissioner (Appeals) against the order-in-original. The Commissioner upheld the original orders and rejected the appeals. Consequently, the appellant filed the appeals before the tribunal.
The tribunal after reviewing the submissions and records found that the appellant carried out chrome plating on cylinders used by the principal manufacturer for producing excisable goods. The appellant claimed exemption under Notification No. 12/2012-ST, Serial No. 30(c).
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The bench noted that the exemption entry specifies that job work involving an intermediate production process related to goods on which the principal manufacturer pays the appropriate duty is exempt.
The appellate tribunal found that the appellant’s chrome plating on gravure printing cylinders, used in the manufacture of excisable goods by the principal manufacturer, qualified for exemption. The lower authorities had wrongly interpreted that the exemption required the job work goods to be cleared with duty.
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The bench found that chrome plating on gravure printing cylinders was essential to the manufacture of duty-paid goods by the principal manufacturer.
The two-member bench comprising Ramesh Nair(Judicial Member) and C L Mahar(Technical Member) allowed the appeal of the assessee with consequential relief.
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