Case Law Details
Gujarat Insecticides Ltd Vs C.C.E. & S.T. (CESTAT Ahmedabad)
The case of Gujarat Insecticides Ltd vs. Commissioner of Central Excise & Service Tax (CESTAT Ahmedabad) deals with the question of whether the manufacturing process carried out by the appellant under job-work for the principal company, M/s Gharda Chemicals Ltd., is liable for service tax under the category of “management, maintenance, or repair services.” This article provides a detailed analysis of the case, emphasizing the consistent decisions made by the CESTAT Ahmedabad on this issue.
Detailed Analysis
The appellant, Gujarat Insecticides Ltd, had undertaken a manufacturing process as a job worker for M/s Gharda Chemicals Ltd, utilizing the machinery and facilities of the latter. The dispute revolved around whether this activity fell under the purview of “management, maintenance, or repair services” and thus attracted service tax.
The appellant’s counsel argued that this issue had already been decided consistently in favor of the appellant by the CESTAT Ahmedabad in earlier cases. They referred to a specific order, Final Order No. A/10706/2023 dated 24/03/2023, which pertained to Gujarat Insecticides Ltd vs. Commissioner of Central Excise & ST, Surat-II.
In the mentioned order, the Tribunal had decided in favor of Gujarat Insecticides Ltd on the same issue. The key points from that order included:
- The activities performed by the appellant constituted the manufacture of excisable goods under job work for M/s Gharda Chemicals Ltd.
- The appellant used its own plant machinery and equipment for production.
- The service recipient, M/s Gharda Chemicals Ltd, paid for the use of manufacturing facilities.
- The demand for service tax under “management, maintenance, or repair services” was not sustainable as the plant and machinery belonged to the appellant.
- Even if the activities were considered business auxiliary services, they would be exempt under Notification No. 08/2005-ST.
- Manufacturing of excisable goods, as per the Central Excise Act, 1944, was excluded from the definition of business auxiliary services.
Based on these findings, the Tribunal in the earlier order had set aside the demand for service tax.
Conclusion
The CESTAT Ahmedabad, in the case of Gujarat Insecticides Ltd, consistently held that the manufacturing process carried out under job work for a principal company does not fall under the category of “management, maintenance, or repair services.” This decision was based on the fact that the plant and machinery used for production belonged to the appellant, and the activities primarily constituted the manufacture of excisable goods. Additionally, if the activities were considered business auxiliary services, they were exempted under relevant notifications.
As a result, the CESTAT Ahmedabad set aside the demand for service tax, providing relief to Gujarat Insecticides Ltd. This case underscores the importance of clear definitions and classifications in tax laws and the need for consistent interpretation by judicial authorities.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is that whether the manufacturing process carried out by the appellant under job-work for the principal M/s Gharda Chemicals Ltd. by using their plant machinery is liable to Service Tax under the head of management, maintenance or repair services.
2. Shri Dhaval K Shah, Learned Counsel appearing on behalf of the appellant at the outset submits that the very same issue in the appellant’s own case has been decided by this Tribunal consistently by the following order:
- CESTAT Ahmedabad, Final Order No. A/10706/2023 dated 24.03.2023 in the case of Gujarat Insecticides Limited Vs. Commissioner of Central Excise & ST, Surat-ii.
- Gujarat Insecticides Ltd. Vs. Commissioner of Central Excise & ST, Surat-ii (2023) 5 Centax 153 (Tri.-Ahmd)
2.1 He submits that in view of the above decisions having same set of facts in the present case the impugned order is not sustainable.
3. Shri Ajay Kumar Samota, Learned Superintendent (AR) appearing on behalf of the revenue reiterates the findings of the impugned order.
4. On careful consideration of the submission made by both the sides and perusal of record, we find that the issue is no longer res-integra in view of the decision of this Tribunal vide final order No. A/10706/2023 dated 24/03/2023. Wherein on the same issue in the appellant’s own case, it was decided in favour of the appellant. The said decision is reproduced below:
“The issue involved in the present case is that, whether under the arrangement of job work by the appellant for M/s. Gharda Chemicals Limited in their factory, the activities would amount to services of Management, Maintenance or Repair or otherwise.
2. Shri Dhaval K. Shah learned Counsel appearing on behalf of the appellant, at the outset submits that the identical show cause notice was issued to the appellant for the different period and in this case the show cause notice is for a subsequent period. In the earlier case, this Tribunal has allowed the appeal of the appellant vide Final Order No. A/10212/2023 dated 06.02.2023, therefore the issue is no longer res-integra
3. Shri Anand Kumar, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. On careful consideration of the submissions made by both the sides and perusal of the record, we find that there is only difference of period in the present case and the case which was decided by this Tribunal vide order dated 06.02.2023. Therefore, except for the period, all the facts are same and therefore as per the judicial discipline we have to follow this Tribunal’s order No. A/1 0212/2023 dated 06.02.2023 wherein this Tribunal has passed the following order:-
“4. We have carefully considered the submission made by both sides and perused the records. We find that the demand was confirmed under the head of Management, Maintenance & Repair Service as per section 65(105) (zzg) of the Finance Act, 1994. The Management, Maintenance & Repair service is defined under section 65 (64) of the Finance Act, 1994 which is reproduced below:-
“(64) “Management, maintenance or repair” means any service provided by —
(i) Any person under a contract or an agreement; or
(ii) A manufacturer or any person authorised by him, in relation to,
(a) Management of properties, whether immovable or not;
(b) Maintenance or repair of properties, whether immovable or not; or
(c) Maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle
Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this clause-
(a) “goods” includes computer software͖
(b) “properties” includes information technology software
From the plain reading of the above definition of Management, Maintenance & Repair Service the main condition is that the Management, Maintenance & Repair Service of the plant should belong to the service recipient and not to the service provider. In the present case the order impugned has held the appellant as service provider and Gharda Chemicals Ltd as service recipient. It is also not disputed that it is the service recipient M/s GCL is paying for the use of manufacturing facilities of the appellant for manufacture of the excisable goods of M/s Gharda chemicals. In this fact the appellant using their own plant machinery equipment that too for production of excisable goods on behalf of M/s Gharda chemical Ltd. In this undisputed fact by any stretch the activities of the appellant cannot be classified under Management, Maintenance & Repair Service. Moreover, the activity per se cannot be treated as service itself for the reason that the activities carried out by the appellant is purely of manufacture of excisable goods with the inputs and packaging material supplied by the GCL and the said manufacturing was done on job work basis on behalf of M/s GCL.
4.1 The principle manufacturer M/s GCL has supplied the input and packing material to the appellant under Rule 4(5)(a) of Cenvat Credit Rules, 2004. It is further established that the activities carried out by the appellant is of manufacture of excisable goods on job work basis. The principle manufacturer M/s. GCL is under legal obligation to discharge the excise duty on the job work goods received by them from the appellant. The show cause notice has not alleged that the principle manufacture has not cleared their final product without payment of excise duty. Accordingly the activities at the most can be classified under sub clause of production or processing on behalf of the client under business auxiliary service.
4.2 Firstly, when the principle manufacturer and appellant as job worker complied with the conditions prescribed under Notification No. 08/2005- ST even if it is treated as business auxiliary service the same is exempted under the said notification, Secondly, when the demand was raised under Management, Maintenance & Repair Service and as per our opinion it is not the correct classification the demand is not sustainable on this ground itself. The adjudicating authority put heavy emphasis on the fact that the entire plant was used exclusively for production of goods of GCL. Therefore, the service is classified under Management, Maintenance & Repair Service. As we already observed above that since the plant machinery equipment used for the purpose of production belongs to the appellant, the service is not classified under Management, Maintenance & Repair Service. Further, the activities carried out by the appellant are undoubtedly production of goods on job work basis on behalf of GCL. This position will not alter irrespective of fact that whether the plant, machinery &equipment are used exclusively for GCL or partly for GCL or partly for others, therefore, on this basis the activity cannot be classified as Management, Maintenance & Repair Service
4.3 We further find that the activity of the appellant is indeed manufacture of excisable goods in terms of section 2(f) of CEA, 1944. As per the definition of business auxiliary service manufacture of excisable goods in terms of section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of business auxiliary service. For this reason also, the demand of service tax is not sustainable.
5. As per our above discussion and finding the impugned order as a whole is not sustainable, hence we set aside the impugned order. The appeal is allowed with consequential relief.”
5. In view of the above decision in the appellant’s own case, the issue is no longer resintegra. Accordingly, following the above decision, in the present case the impugned order is set-aside the appeal is allowed.”
5. In view of the above decision, the issue is no longer res-integra, therefore, the impugned order is not sustainable. Hence, the impugned order is set aside. Appeal is allowed.
(Pronounced in the open court on 11.09.2023)
