Processing of goods during relevant time-whether falling under BAS

PJ/Case Laws/2010-11/1087

Case: Auto Coats v/s Commissioner of C. EX. (S.T.), Coimbatore

Citation: 2009 (15) S.T.R. 398 (Tri. - Chennai)

Issue:- Processing of goods by assessee on behalf of the client – not falling under taxable service during material time – no service tax can be demanded.

Brief Facts:- Appellant were performing activities such as power coating, bending, drilling etc. of components and machinery parts entrusted with them by various customers during the period 10-9-2004 to 31-5-2005. Department issued Show Cause Notice to the appellants alleging that the appellants had engaged in Business Auxiliary Service (BAS) without following statutory formalities including payment of service tax on the activity classified under BAS. Demand of service tax was affirmed and penalties under Section 76, 77 and 78 of the Finance Act, 1994 were imposed by the Original Authority.

Hence, appellant is before the Tribunal.

Appellant’s Contentions:- Appellant submitted that during the material period service tax was attracted under BAS only in cases where the activity fell under the definition ‘production of goods on behalf of the client’. This entry under BAS was substituted on 10-9-2004 with the entry ‘production or processing of goods for, or on behalf of, the client.’ The activity undertaken by the appellants could not be described as on behalf of any other person. They had processed the goods involved not on behalf of any other person. For the activity to be exigible to service tax the same should have been undertaken on behalf of a client. This was not the case of the appellants.

Reasoning of Judgment:- The Tribunal held that the activities performed by the appellant could not be said to have been undertaken on behalf of any other person. The appellant had undertaken the activities themselves for a fee. It was only with effect from 16-6-2005 that such activities undertaken by a person for another was brought under BAS. It was held that during the material period, which is prior to 16-6-2005, the appellants had engaged in certain activities which could be described as processing of goods for its customers. By virtue of the language of the entry, during the material period, unless a person was engaged by another for processing the goods entrusted by a third person such activity would not be eligible to service tax. Impugned order set aside.

Decision: - Appeal allowed.

Comments:- We have across many decisions in which the future amendment comes to rescue the assessee. Here also, the amendment in BAS definition underlines that these activities were not covered earlier. Hence, the exemption was granted.

***********

Comments

PJ/Case Laws/2010-11/1087

Post a Comment

Query