Brief Facts of the case
The appellants manufacture excisable goods falling under Chapter 29 of Central Excise Tariff Act, 1985. On scrutiny of the records, departmental officers noticed that during the period 10/09/2004 to 28/02/2005 appellant had received some amount towards job-work charges and processing charges. It revealed that the appellant carried out job-work on the goods supplied by the client and the same were returned back to the client after processing, without payment of any duty being job-work carried out by the appellant for which appellant received an amount as a consideration. The Revenue’s contention is that the said amount is a consideration on which service tax liability arises under the category of ‘Business Auxiliary Services’ in terms of Section 65(19) of the Finance Act, 1994.
Show-cause notice was issued for demand of service tax liability interest thereof and proposing to impose penalties. The appellant contested the show cause notice on merits, taking a plea that the goods manufactured by them under job-work is amounting to manufacture hence service tax liability will not arise. The adjudicating authority rejected the contention and confirmed the demands with interest and imposed penalties. Appeal filed by the appellant with the first appellate authority also met with the same fate.
Contentions of the Appellant
The appellant contended that the process of converting ‘Para Nitro Cumene, in to ‘Para Cumidine’ amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944. The appellant submitted that the resultant product ‘Para Cumidine’ is different from the input product ‘Para Nitro Cumene’. The appellant further contended that definition of ‘Business Auxiliary Services’ clearly excludes any activity that amounts to manufacture within the provisions of Section 2(f) of the Central Excise Act, 1944.
Contentions of the Revenue
The department contended that the appellant is processing goods on behalf of his clients and is not discharging the Central Excise duty. Hence, he is correctly charged with non-payment of service tax liability. He reiterates the findings of the lower authorities.
Held by Hon’ble CESTAT, Mumbai
The Hon’ble CESTAT, Mumbai stated that firstly, it is undisputed that the goods or inputs were received by the appellant from the principal manufacturer under job work-challan as per the provisions of Rule 4(5) (a) of the CENVAT Credit Rules. The said sub-rule mandates for movement of duty paid inputs on which CENVAT credit is availed, for further processing in to intermediate product outside the factory premises and receiving them back for further consumption. This activity of processing in the appellant’s factory premises is definitely an activity of ‘manufacture’ in as much as, the finished goods coming into existence after processing is different from the inputs which are put into use.
Secondly, after pursuing the chemical formula and the properties of the inputs and of the final goods and it is clear that there is a difference between the two which would mean that the finished goods ‘Para Cumidine’ is arising out of a manufacturing process. Therefore, the activity undertaken by the appellant would amount to manufacture even if it is under a job-work procedure.
In view of the above, the appeal is allowed.