Job work in the nature of intermediate process in manufacturing activity is not leviable to service tax.

PJ/Case Law/2013-14/2103

Case:- M/s JINDAL STAINLESS STEELWAY LTD Vs COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II

Citation:- 2014-TIOL-285-CESTAT-MUM

Brief facts:- The appeal and stay petition arouse from Order-in-Appeal No. US/155/RGD/2013 dated 31.05.2013 passed by the Commissioner of Central Excise (Appeals), Mumbai II. Vide the impugned order, the lower appellant authority had rejected the claim of the appellant that the activity undertaken by them amounts to manufacture and not service activity and, therefore, they were liable to discharge Service Tax amounting to Rs.20,15,853/- for the services rendered during April, 2007 to March, 2012. Hence, the present appeal.

Appellant’s contentions:- The learned Counsel for the appellant submitted that the appellants had been undertaking job work for M/s. Jindal Steel Ltd. under Rule 4(5)(a)/4(6) of the CENVAT credit Rule, 2004 and also for M/s U.B. Stainless Steel. On the materials received for job-work under Rule 4(5)(a) of the said CENVAT credit Rules, 2004, the appellant undertook slitting/cutting of length/polishing of HR/CR coils of Stainless Steel and these were returned to the raw materials supplier for further manufacture or for export under claim of rebate of duty. Since the goods had been moved under Rule 4(5)(a)/4(6) procedure, which was an intermediate process in the manufacturing activity, on the said intermediate process, Service Tax demand would not arise. He relied on the decision of this Tribunal in the case of Alkyl Amines Chemicals Ltd. Vs. CCE, Pune - III - 2013 (31) STR 27 (Tri-Mum)where in a similar situation, it was held that in the case of movement of goods under Rule 4(5)(a) procedure, Service Tax provisions would be inapplicable. In the case of Deshmukh Services Vs. CCE, Nagpur - 2013-TIOL-852-CESTAT-MUM also, the same view was taken. However, in the said case, the matter was remanded back to the adjudicating authority for considering the eligibility to exemption under Notification No. 8/2005-ST dated 1.3.2005 which provides for exemption from Service Tax in respect of job-work undertaken on behalf of the manufacturer and the goods were returned for further manufacture. It was accordingly contended that even if the activity was held to be a taxable service and not manufacture, the appellant would be eligible for the benefit of Notification No.8/2005 and, therefore, there would not be any liability of Service Tax. Accordingly, it was prayed that stay be granted and the appeal allowed.

Respondent’s contentions:- The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, reiterated the findings of the lower authorities and submitted that the activity undertaken by the appellant did not amount to manufacture and hence the same amounted to service. Accordingly, he prayed for putting the appellant to terms.

Reasoning of judgment:- After hearing both the sides the Bench was of the held that the issue lied in a narrow compass, they were of the view that the appeal itself could be disposed of at this stage. Therefore, after waiving the requirement of pre-deposit and with the consent of both sides, they took up the appeal for consideration and disposal.
The activity undertaken by the appellant was only slitting/ cutting of length of HR/CR coils of stainless steel. The Hon'ble Delhi High Court in the case of Faridabad Iron & Steel Traders Association - 2004 (178) ELT 1099 = (2003-TIOL-79-HC-DEL-CX) held that the cutting and slitting of coils would not amount to manufacture. The said decision was also affirmed by the Hon'ble Apex Court in the same case [2005 (181) ELT A68 (SC)]. Therefore, the contention of the appellant that cutting and slitting of HR/CR coils would amount to manufacture was no longer sustainable in view of the decisions cited supra. However, the contention of the appellant that it was only an intermediate process and the goods after slitting/cutting were used in further manufacture of SS pipes/tubes on which duty liability was discharged, merits consideration. Notification No. 8/2005-ST provides that in the case of service undertaken by way of job-work and the goods were returned to the original supplier for further manufacture, the benefit of the said exemption would apply. This aspect had not been examined by the adjudicating authority at all.
In view of the above, we set aside the impugned order and remand the case back to the adjudicating authority to consider the matter afresh and pass the order in accordance with law giving the specific findings as to why the activity undertaken by the appellant was not eligible for the benefit of Notification No. 8/2005-ST dated 1.3.2005. Thus, the appeal was allowed by way of remand. The stay application was also disposed.

Decision:- Appeal was allowed by the way of remand.

Comment:- The analogy drawn from the case is that as per the cases cited in the “reasons of judgment” there lies no doubt in the fact that slitting/ cutting of length of HR/CR coils of stainless steel amounts to provision of service and not to manufacture. The assessee in such case is liable to pay service tax on the job work done by him. However, if the job work is only an intermediate process and the goods after slitting/cutting are used in further manufacture of SS pipes/tubes on which duty liability is discharged, the benefit of exemption from service tax can be availed under Notification No. 8/2005-ST. Accordingly, the appeal was allowed by way of remand.

Comments

PJ/Case Law/2013-14/2103

Post a Comment

Query