The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service of manufacture of excisable goods in terms of section 2(f) of Central Excise Act ,1944 does not falls under definition of business auxiliary service.
Gujarat Insecticides Ltd, the appellant was under job-work for the principal M/s Gharda Chemicals Ltd. by using their plant machinery. The issue is that whether the manufacturing process carried out by appellant is liable to Service Tax under the head of management, maintenance or repair services.
Shri Dhaval K Shah, Counsel appearing on behalf of the appellant at the outset submitted that the very same issue in the appellant’s own case has been decided by this Tribunal consistently in the case of Gujarat Insecticides Limited Vs. Commissioner of Central Excise & ST, Surat-ii. Shri Ajay Kumar Samota, Superintendent (AR) appearing on behalf of the revenue reiterated the findings of the impugned order.
The demand was confirmed under the head of Management, Maintenance & Repair Service as per section 65(105) (zzg) of the Finance Act, 1994. From the plain reading of the definition of Management, Maintenance & Repair Service the main condition is that the Management, Maintenance & Repair Service of the plant should belong to the service recipient and not to the service provider.
The principle manufacturer M/s GCL has supplied the input and packing material to the appellant under Rule 4(5)(a) of Cenvat Credit Rules, 2004. It is further established that the activities carried out by the appellant is of manufacture of excisable goods on job work basis. The principle manufacturer M/s. GCL is under legal obligation to discharge the excise duty on the job work goods received by them from the appellant.
The show cause notice has not alleged that the principle manufacture has not cleared their final product without payment of excise duty. Accordingly the activities at the most can be classified under sub clause of production or processing on behalf of the client under business auxiliary service.
When the principle manufacturer and appellant as job worker complied with the conditions prescribed under Notification No. 08/2005- ST even if it is treated as business auxiliary service the same is exempted under the said notification, Secondly, when the demand was raised under Management, Maintenance & Repair Service and as per our opinion it is not the correct classification the demand is not sustainable on this ground itself.
The adjudicating authority put heavy emphasis on the fact that the entire plant was used exclusively for production of goods of GCL. Therefore, the service is classified under Management, Maintenance & Repair Service.
The two member bench comprising Mr. Ramesh Nair, Member (Judicial) and Mr. C L Mahar, Member (Technical) held that “since the plant machinery equipment used for the purpose of production belongs to the appellant, the service is not classified under Management, Maintenance & Repair Service. Further, the activities carried out by the appellant are undoubtedly production of goods on job work basis on behalf of GCL”.
“As per the definition of business auxiliary service manufacture of excisable goods in terms of section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of business auxiliary service. For this reason also, the demand of service tax is not sustainable.”, the Tribunal observed.
The CESTAT set aside the impugned order and allowed the Appeal.
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