CESTAT, BANGALORE BENCH
Commissioner of Central Excise, Customs & Service Tax, Tirupati
STAY ORDER NOS. 86-87 OF 2012
APPLICATION NOS. ST/STAY/716-717 OF 2010
APPEAL NOS. ST/1257-1258 OF 2010
JANUARY 18, 2012
P.G. Chacko, Judicial Member – These applications seek waiver of pre-deposit and stay of recovery in respect of service tax of over Rs. 1.17 crores (education cess included) demanded for the period from October 2003 to September 2008 covered by show-cause notice dated 21-4-2009 as also in respect of the penalties imposed on the appellant. After a perusal of the records and hearing both sides, we note that the impugned demand is not under any specific head of taxable service. The learned Commissioner has confirmed the demand against the assessee under 4 heads viz. (i) Management, Maintenance or Repair Service (ii) Manpower Recruitment or Supply Service (iii) Erection, Commissioning and Installation Service and (iv) Business Auxiliary Service (BAS) without providing item-wise breakup of the gross taxable value. We further note that the appellant paid an amount of Rs. 37 lakhs during the course of investigations and the same stands appropriated. The learned counsel for the appellant submits that a further amount of Rs. 15,96,635/- has also been paid by the assessee though the same is not reflected in the impugned order. Adverting to the merits of the demand, the learned counsel submits that a major part of the demand is based on the finding that the appellant is not entitled to claim the benefit of Notification No. 8/2005-S.T., dated 1-3-2005. In this connection, it is submitted that the appellant was fabricating various items like ducts for M/s. Ultratech Cements Ltd. who were to use the said items in or in relation to the manufacture of their excisable products. It is submitted that, on these facts, the appellant could claim the benefit of the above notification. It is pointed out that the benefit was denied on the ground that the ducts and other items fabricated by the appellant were not excisable goods covered by the First Schedule to the Central Excise Tariff Act. It is the further submission of the learned counsel that the entire demand is revenue-neutral inasmuch as any amount of service tax paid by the appellant will be available as CENVAT credit to the service recipient. Learned counsel has also pleaded time bar against a major part of the demand of service tax. According to him, only an amount of Rs. 18 lakhs (approx.) is coming within the normal period of limitation.
2. We have heard the learned Deputy Commissioner (AR) also who has reiterated the relevant finding of the Commissioner.
3. After considering the submissions, we note that the impugned demand of service tax and education cess is not under any determinate head of taxable service. No breakup of the gross value for different categories mentioned in the impugned order is forthcoming. Apparently, the appropriate taxable service was not identified either in the show-cause notice or in the impugned order. A demand of service tax without correct classification of the taxable service is alien to the scheme of service tax levy. This apart, the learned Commissioner appears to have denied the benefit of the aforesaid notification on a ground which is not sustainable in law, given the parameters of the said notification. Activities otherwise includible within the ambit of ‘Business Auxiliary Service’ were excluded from the levy from 2004 onwards where such activities involved manufacture of excisable goods. The notification was issued subsequently to exempt the taxable service of “production or processing of goods for or on behalf of the client”, from payment of service tax on condition that the goods produced or processed using raw materials or semi-finished goods supplied by the service recipient were returned back to them for use in or in relation to manufacture of any other goods falling under the First Schedule of the Central Excise Tariff Act on which appropriate duty of excise was payable. The learned counsel submits that the notification was applicable only to cases where the raw materials or semi-finished goods supplied by the service recipient were processed without undertaking any “manufacture” “coming within the scope of its definition under section 2(f) of the Central Excise Act.” If the process amounted to manufacture, the activity would have remained outside the scope of ‘Business Auxiliary Service’. For claiming the benefit of the notification, the assessee should be held to have provided the taxable service. On these premises, the learned counsel has claimed the benefit of the above notification. Prima facie, this plea is sustainable in terms of the notification inasmuch as the benefit of exemption was not denied on any other ground. The appellant has admittedly deposited an amount of Rs. 37 lakhs. Their claim to have made a further deposit of Rs. 15 lakhs is not acceptable at this stage as it is yet to be substantiated. Even without this deposit, the amount of Rs. 37 lakhs paid by the appellant at investigation stage can, in our view, be maintained as pre-deposit in this appeal. It is ordered accordingly. There will be waiver of pre-deposit and stay of recovery in respect of the penalties imposed on the appellant and also in respect of the balance amount of service tax and education cess and interest thereon. The stay applications stand allowed.