Whether job worker liable to pay service tax under BAS for undertaking job work under notification 214/86-CE?

PJ/CASE LAW/2015-16/2766

Case:-MUNISH FORGE PVT LTD. VERSUS COMMISSIONER OF C. EXCISE & S.T., LUDHIANA

Citation:-2015(37) S.T.R. 662 (Tri. –Del.)

Brief facts:-The appellant are job worker and they received rounds from M/s. Dev Arjuna Cast & Forge Pvt. Ltd., Ludhiana, for jobwork and subjected the same to cutting and bending and returned the processed goods without payment of duty to principal manufacturer who used the same in the manufacture of scaffolding items. The principal manufacturer had given an undertaking in terms of Notification No. 214/86-C.E. undertaking to use the goods received from the appellant job-worker for manufacture of their final product and clear the same on payment of final duty. The Dept. was of view that the appellant are providing business auxiliary services to their principal manufacturer accordingly issued show cause notice dated 27-9-2011 for demand of service tax amounting to Rs.10,83,469/- under section 73 of the finance Act 1994.

Appellant’s contention:-Shri Kamaljeet Singh, ld. Advocate for appellant, pleaded that the process undertaken by the appellant amount to manufacture , that they were availing exemption under Notification No. 214/86-C.E., as a job worker against an undertaking given by the principal manufacturer to use the job work goods in manufacture of final products and clear the same on payment of duty. Addl. Commissioner as well as commissioner has erroneously concluded that the job work goods have not been used by the principal manufacturer in the manufacture of final products on which the duty has been paid wrongly denied the benefit of exemption under Notification No. 8/2005-S.T., dated 1-3-2005, that during the period of dispute, the appellant’s client- M/s. Dev Arjuna Cast & Forge Pvt. Ltd. who is the principal manufacturer, was manufacturing named “Lever Nut”, which is scaffolding item for supply to M/S. L&T Ltd., that a part ‘handle’ for this scaffolding item was got manufactured on job work basis by the principal manufacturer through the appellant out of the rounds supplied by them, that the appellant was performing the process of cutting, bending and threading on the rounds and also some finishing processes like hit treatment and shot blasting, etc. were also undertaken on job work item, by these processes, a different item “handle” having distinct name , character, and uses emerges and for this reason only they were availing the exemption under notification no. 214/86-C.E. that these process, therefore, cannot be treated as the business auxiliary services of production of goods not amounting to manufacture, that in any case , since the goods supplied by the appellant to the principal manufacturer in production of final products which were cleared on payment of final duty, they are also eligible for exemption under Notification No. 8/2005-S.T. and that in view of the above, the impugned order is not correct.

Respondent’s contention:- Shri Gobind Dixit, ld. Departmental representative defended the impugned order by reiterating the findings of commissioner.

Reasoning of judgement:-It is not disputed that the appellant subjected those rounds to the process of cutting, bending, threading and finishing process like shot blasting, heat treatment etc. It is also not disputed that the appellant had intimated the department about availment of exemption under Notification No. 214/86-C.E. and also the principal manufacturer had given an undertaking under this notification to use the jobwork goods in the manufacture of final products which would be cleared on payment of duty. From these facts, it is clear that department itself has accepted the appellant’s activities as manufacture. Moreover subjecting the rounds to the process of cutting, bending and threading, heat treatment, shot blasting, as a resulting which, a part of scaffolding item “handle” emerges would amount to manufactures. Therefore, the activity of appellant cannot be treated as business auxiliary services. Moreover, even if treated as service, when it is not denied that the jobwork goods were returned by appellant to the principal manufacturer, the exemption under Notification No.8/2005-S.T. dated 1-3-2005 cannot be denied on the ground that there is no evidence that the goods produced were used by the principal manufacturer in or in relation to the manufacture of final products. In view of this the impugned order is not sustainable.

Decision:- The appeals as well as stay application are allowed.

Comment:-The gist of this case is that the job worker is not liable to pay service tax on the processing done on the goods which are further used in or in relation to manufacture of dutiable goods as per notification no. 8/2005-ST dated 01.03.2005. Furthermore, the benefit of exemption cannot be denied on the ground that there is no evidence that the job worked goods were further used by the principal manufacture in or in relation to the manufacture of final products.

Prepared by:- Anas Kachaliya

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PJ/CASE LAW/2015-16/2766

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