Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Missing seized records must be considered while testing ITC claim; duplicate GST demands ordered corrected: Delhi High Court. *  GST appeal can’t be rejected without addressing taxpayer’s grounds: Allahabad High Court. *  Surplus IGST credit can offset CGST, SGST shortfall: GSTAT. *  GST refund can’t be denied when cancelled airfares are returned with tax: GSTAT. *  3 Hearing notices issued within 2 minutes: Gujarat High Court flags portal flaw, seeks report. *  GSTR-9, GSTR-9C filing for FY 2025-26 enabled; pending GSTR-1 and GSTR-3B must be filed first. *  Dupattas are exempt fabrics, can’t be taxed as fibres at 4%: Madras High Court. *  Full transitional credit allowed on capital goods received after GST rollout: GSTAT denies Rs. 6.99 lakh export duty credit. *  GST return mismatch alone can’t justify fraud proceedings: GSTAT orders fresh adjudication under section 73. *  Supplier found non-existent later can’t alone justify input tax credit denial: GSTAT. *  GST interest stops once tax reaches government account, can’t run until return filing: GSTAT. *  Cancelled flat booking- GST refund can’t be denied without excluding COVID period from limitation: GSTAT. *  India notifies rules of origin for India–New Zealand FTA. *  Incomplete E-bike kits classifiable as complete vehicles, but not eligible for CKD duty concession: CESTAT. *  Same GST rate on main input and output can’t by itself bar inverted duty refund: GSTAT. *  Unjust enrichment doesn’t apply to customs refunds from assessments finalised before July 13, 2006: Gujarat High Court. *  CENVAT credit can’t be denied solely because plant And machinery are embedded in earth: Karnataka High Court. *  DFIA exports ineligible for RoDTEP benefits; customs directs repayment with applicable interest. *  Second E-Way bill alone doesn’t prove another supply: GSTAT. *  Bail denied in Rs. 1.19 crore fake GST refund case over risk of accused absconding again: Punjab and Haryana High Court. *  GST registration can be restored after revocation deadline if outstanding dues are paid: Gauhati High Court. *  Multiple GST proceedings over same suppliers: Calcutta High Court directs dept. to share findings for adjudication. *  E-Governance portal services not OIDAR, fixed deposit interest not taxable: CESTAT. *  Rs. 500 Stamp duty required on authority letters for CAs, CMA and GST practitioners in Pune GST division.  *  Rs. 1.10 crore GST refund must be paid in cash after business closure: Allahabad High Court. *  Godown rent attracts 18% GST even when used exclusively for exempt agricultural warehousing: AAR. *  GST portal launches "Multi-State Registration" facility: one master TRN for registration applications across multiple States/UTs. *  RoDTEP scheme extended till 31st December, 2026.  *  Mere disagreement with order can’t override Rs. 20 lakh appeal limit: GSTAT. *  Customs interest can’t be backdated before confiscation liability is determined; nearly 8 year period excluded: Delhi High Court.
Subject News *  GST summons: anticipatory bail maintainable without arrest order, but relief denied in evasion case: Allahabad High Court. *  GST Appeal can’t be decided without hearing taxpayer’s objections to fresh evidence: Allahabad High Court. *  GST ITC can’t be reversed merely because supplier grants discount without reducing tax liability: GSTAT. *  Mere quoting of GST provision is not a valid charge: GSTAT quashes ITC denial. *  Personal hearing mandatory before adverse GST order, even without taxpayer’s request: Rajasthan High Court. *  Parallel bail pleas without full disclosure amount to abuse of process Rs. 43.08 crore GST case sent for fresh hearing: Supreme Court. *  GST refund based on unchallenged advance ruling can’t be recovered using later circular: GSTAT. *  Payment of GST alone doesn’t end interest and penalty liability when tax and interest remain unpaid beyond 30 days of notice: GSTAT. *  GST demand over builders’ 80% procurement rule requires reasoned adjudication: GSTAT. *  Eligible ITC doesn’t automatically entitle taxpayers to compensation cess refund on domestic sales: GSTAT. *  GST confiscation order passed before reply deadline invalid: GSTAT. *  GST interest can’t be retained after tax refund on delayed export receipts: Punjab & Haryana High Court. *  GST appeal can’t be dismissed over pre-deposit shortfall without opportunity To respond: Bombay High Court. *  DGGI SCN can’t be challenged before reply and adjudication:Chhattisgarh High Court. *  GST input tax credit can’t be denied solely due to supplier’s retrospective registration cancellation: GSTAT. *  GST notice must explain fraud allegations; merely repeating section 74 Is not enough:  Himachal Pradesh High Court. *  Audit detection alone can’t justify GST fraud penalty; specific suppression must be proved: GSTAT. *  GST order uploaded only under ‘Additional Notices’ tab without separate intimation set aside: Calcutta High Court. *  Service Tax appeal can’t be rejected for missing pre-deposit proof when payment is already recorded: CESTAT. *  SGST dept. can’t hear appeal against CGST order: Calcutta High Court. *  Mere dispatch of tax order can’t prove service or make appeal time-barred: CESTAT. *  Dealer incentives can’t be taxed merely on ledger entries: CESTAT. *  DGFT orders quashed for failure to supply DRI letter relied upon in SCN: Bombay High Court. *  GST penalty u/s 122(1A) can’t apply to Pre-2021 transactions; unregistered beneficiaries also covered: Delhi High Court. *  Expired E-way bill caused by wrong PIN code can’t justify GST penalty without intent to evade tax: GSTAT. *  Used railway rails can’t be taxed as track material without proof they are fit for reuse: CESTAT. *  Earlier DGGI notice doesn’t bar separate GST demand on different issue: Delhi High Court. *  ITC dispute involves no question of law: GSTAT directs appeal to Vice-President. *  Earlier DGGI notice doesn’t bar separate GST demand On different issue: Delhi High Court. *  No E-way bill required for interstate goods movement in november 2017: GSTAT quashes detention and penalty.  

Comments

Print   |    |  Comment

PJ/Case law/2014-15/2271

Whether electroplating of goods amounts to manufacture?

Case:- INTERPLEX ELECTRONICS INDIA P. LTD. Versus COMMR. OF S.T., BANGALORE
 
Citation:-2014 (33) S.T.R. 56 (Tri. - Bang.)


Brief facts:-The appellant is engaged in the manufacture of various electric and electronic goods. Besides undertaking manufacture on their account, they have also undertaken electroplating of connector components for M/s. Tyco Electronic Corporation India Pvt. Ltd. Job work consists of electroplating of goods supplied by M/s. Tyco Electronic with silver or gold. The appellant was availing the benefit of Notification No. 8/2005 on the ground that they are engaged in the manufacture of these goods and they were supplying the same to M/s. Tyco Electronic. However, the department took a view that the appellant should have discharged Service Tax on the electroplating cost including the cost of electroplating materials used by the appellant. After completion of proceedings, Service Tax of Rs. 2,82,39,803/- with interest for the period from 1-11-2007 to 31-5-2011 has been demanded and penalty has also been imposed under Finance Act, 1994.
While the application for waiver of pre-deposit and stay of recovery and the appeal were pending before this Tribunal, the department proposed to recover the amounts demanded in the order-in-original. The appellants filed a writ petition before the Hon’ble High Court of Karnataka seeking writ of mandamus to the department not to initiate any coercive action to recover the adjudication levies. The Hon’ble High Court in their order dated 25-2-2013 directed that the department should not resort to any coercive steps till the stay application is disposed of by the Tribunal and the stay application filed by the appellant should be considered by the Tribunal within three weeks and the appeal itself should be disposed of within four weeks from the date of receipt of the order. The order of the Hon’ble High Court was filed by the counsel for the appellant with the registry on 8-3-2013 and we take note of the fact that the four weeks time prescribed by the Hon’ble High Court for disposal of the appeal would be over by 7-4-2013. In view of the specific directions of the Hon’ble High Court and in view of the fact that the matter was heard in considerable detail, we feel that the matter can be disposed of at this stage itself. We take up the appeal itself for disposal after waiving the condition of pre-deposit of all the adjudication levies.
 
Appellant’s contentions:-The learned counsel for the appellant submitted that the contentions of the revenue that the process does not amount to manufacture and therefore the activity undertaken by the appellant has to be classified as a service under ‘business auxiliary service’ and Service Tax should be levied is not correct. He relies upon the decision of this Tribunal in the case of Modison Metal Refiners v. Commissioner - 1996 (88)E.L.T.292 (Tribunal) and submits that in this decision, it was held that electroplating of electrical contacts on job work basis is a process incidental or ancillary to the completion of manufacture and amounts to manufacture. He relies on the Section-note 6 to Section 16 of the Schedule to the Central Excise Tariff Act, 1985 to submit that conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article, shall amount to manufacture and also he submits that the process undertaken by the appellant amounts to manufacture. He submits that the process undertaken by the manufacturer in this case impart special qualities which are not existing in the raw material supplied and they acquire a totally different character and also it amounts to completion or finishing of the incomplete product. Further, he also submits that the stand of the department that appellant is liable to pay Service Tax in view of the fact that the product supplied by them to M/s. Tyco Electronics, which is a 100% EOU is eligible for exemption under Notification No. 24/2003-C.E., dated 31-3-2003, the appellant is not eligible for exemption under Notification No. 8/2005-S.T., dated 1-3-2003 is not correct since Notification No. 24/2003 does not provide unconditional exemption to the products manufactured by a 100% EOU. He also submits that even if the above two submissions are of no help, they have a strong case on limitation also. Further he also submits that appellant has paid VAT on 75% of the electroplating cost and therefore even on valuation, the service tax is payable only to the extent of 25%.
 
Respondent’s contentions:-The learned Additional Commissioner (AR) would submit and draw our attention to the several decisions of the Tribunal taken note of by the Commissioner in the impugned order to come to the conclusion that the process undertaken by the appellant does not amount to manufacture and therefore the impugned order is sustainable on this ground alone.
Further, he reiterates the observation of the Commissioner that appellant is not eligible for the benefit of Notification No. 8/2005 since the products supplied to 100% EOU after undergoing process are exempt from payment of duty.
 
Reasoning of judgment:- First of all, they take note of the fact that according to section-note to Section XVI of the Central Excise Tariff-
In respect of goods covered by this Section, conversion of an article which is incomplete or unfinished but having the essential character of the complete or finished article (including ‘blank’, that is an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into a finished article or a part), into complete or finished article shall amount to ‘manufacture’.
Further even before this section-note was introduced, this Tribunal had considered the issue as to whether electroplating amounts to manufacture or not in the case of Modison Metal Refiners(supra). In that case also, the Tribunal was considering the question as to whether electroplating of electrical contacts amounts to manufacture or not. This Tribunal taking note of the decision of the Hon’ble Supreme Court in the case of TISCO v. UOI - 1988 (35)E.L.T.605 (S.C.) had held that electroplating would amount to manufacture. On the other hand, they have briefly considered all the decisions taken note of by the Commissioner on this issue and they find that in none of the decisions the product under consideration were classifiable under Chapter 85 and none of the decisions took note or considered section note to Section XVI which has been brought to their notice by the learned counsel. Under these circumstances, they find that the decision of the Tribunal stated by the learned counsel covers the issue as to whether electroplating of electrical contacts by the appellant amounts to manufacture or not and therefore respectfully following the Tribunal’s decision earlier and taking note of the section-note, they hold that the process undertaken by the appellant amounts to manufacture and therefore they are not liable to pay Service Tax in view of the specific exclusion in the definition of ‘business auxiliary service’ which provides that if the process amounts to manufacture, no Service Tax would be liable to be paid.
Even though the issue can be decided on the sole ground whether the process amounts to manufacture or not, they would like to consider applicability of the second ground viz., exemption under Notification No. 8/2005-S.T. also, which provides for exemption from Service Tax to the goods produced on behalf of the client provided such exemption is allowed only when such goods are used by the principal manufacturer or further manufacture of other goods on which appropriate duty of excise is payable. The Notification also defines ‘appropriate duty of excise’. According to the Notification, ‘appropriate duty of excise’, shall not include ‘nil’ rate of duty or duty of excise wholly exempt. They find themselves in agreement with the submission that the Notification when read with the ‘appropriate duty of excise’ would mean that only when the goods manufactured by the principal manufacturer attract ‘nil’ rate of duty as per tariff or unconditional full exemption, the benefit of Notification No. 8/2005 is denied. In this case, the 100% EOU viz., M/s. Tyco Electronics to whom the appellants have supplied the goods on job work basis is eligible for exemption Notification No. 24/2003-C.E., dated 31-3-2003. It is the stand of the department that this notification exempts 100% EOU from payment of duty and therefore the appellant is not eligible for the benefit of Notification No. 8/2005-S.T. They find that Notification No. 24/2003-C.E., dated 31-3-2003 has a proviso which reads as under :
“Provided that the exemption contained in this notification in respect of duty of excise leviable under Section 3 of said Central Excise Act shall not apply to such goods if brought to any other place in India.”
This clearly shows that this is not an unconditional exemption notification. Exemption is available only if the goods are not brought to any other place in India. Since exemption under Notification No. 24/2003 is not an unconditional exemption, they find that the appellant has a case for eligibility for exemption under Notification No. 8/2005 also even if it is assumed that the process does not amount to manufacture.
Since they have found that the appellant has made out a case on merits on both the grounds as discussed above, they do not consider it necessary to consider the issue relating to limitation, penalty, etc. In view of the above, the appeal is allowed with consequential relief, if any, to the appellant. The stay petition also gets disposed of.
 
Decision:-Appeal was allowed.

Comment:- The gist of the case is that the activity of electroplating amounts to manufacture and so no service tax can be levied on the said activity. Further, it was also contended that as the goods after being electroplated by the assessee were being cleared to 100% EOU without payment of duty, the assessee were liable to pay service tax on electroplating activity because they are not covered by exemption notification 8/2005-ST that gives exemption from levy of service tax to such activities which are used in relation to manufacturing of final products cleared on payment of excise duty. However, it was concluded by the tribunal that as EOU claimed conditional exemption, they were eligible to claim the benefit of the notification no. 8/2005-ST.

Prepared By:- Monika Tak

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com