Whether collection of fly ash and supplying to other for further processing leviable to service tax under BAS?

PJ/Case Law/2014-15/2141

Case:- JAY ENTERPRISES Vs COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, NASIK

Citation:- 2014-TIOL-286-CESTAT-MUM

Brief facts:- The appeal and stay petition were directed against Order-in-Appeal No. RPS/52/NSK / 2013 dated 25/02/2013 passed by the Commissioner of Central Excise & Customs, (Appeals), Nasik. Vide the impugned order a service tax demand of Rs.9,23,092/- had been confirmed against the appellant M/s. Jay Enterprises for the period 2005-06 to 2009-10 classifying the services rendered by them to M/s. Dirk (India) Ltd. as Business Auxiliary Service.

Appellant’s contentions:- The learned counsel for the appellant submitted that as per the agreement entered into between the appellant and M/s. Dirk India Ltd., the nature of the job undertaken by them was collection of fly ash from Nasik Thermal Power Station and supplying the same to M/s. Dirk India Ltd. at their factory premises for further processing. Thus, the activity undertaken by them does not fall under Business Auxiliary Service at all as defined in Section 65(19) inasmuch as the appellant does not produce or process any goods on behalf of the client. Therefore, the entire demand was unsustainable in law. He further submitted that the appellant had made a payment of Rs.2,67,392/- and interest of Rs.46,154/- against the confirmed demands. Accordingly, he pleaded for grant of stay.

Respondent’s contentions:- The learned Superintendent (AR) appearing for the Revenue, on the other hand submitted that, for the period 2006-07 onwards, the appellant themselves have been classifying the service under Business Auxiliary Service and discharged service tax liability and, therefore, there was no reason why for the period 2005-06 the service should not be classified as Business Auxiliary Service and service tax demand confirmed. He further submitted that the appellant did not appear before the adjudicating authority when the case was listed for hearing. In these circumstances, he pleaded that the impugned order was sustainable in law and, therefore, the appellant be put to terms.

Reasons of judgment:- We have carefully considered the submissions made by both the sides. To fall under Business Auxiliary Service, the activity undertaken should amount to producing or processing of goods on behalf of the client. In the present case, fly ash was produced by the Nasik Thermal Power Station. The appellant did not process or produce fly ash at all. They merely collected the fly ash from Nasik Thermal Power Station and delivered the same at the premises of his client M/s. Dirk India Ltd. in the vehicles given by M/s. Dirk India Ltd. Thus, the service was more appropriately classifiable under Cargo Handling Service and not under Business Auxiliary Service. In view of the above, the appellant had made out a strong prima facie case for waiver of pre-deposit of the dues adjudged. Accordingly, the Bench granted waiver from pre-deposit of the adjudicated liabilities against the appellant and stay recovery thereof during the pendency of the appeal.

Decision:- Stay granted.

Comment:- The analogy drawn from the case is that to fall under Business Auxiliary Service, the activity undertaken should amount to producing or processing of goods on behalf of the client. Thus mere delivery of item from one place to another shall not amount to processing and thus cannot fall under Business Auxiliary Service instead it shall be correctly classifiable as Cargo Handling Service. As the service tax demand was raised under the wrong category of service, the stay application was allowed.

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PJ/Case Law/2014-15/2141

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