TANSI STRUCTURAL Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE lower authorities have demanded service tax of over Rs. 2.00 lakhs along with education cess from the appellants in respect of the activity of the latter designated by the Revenue as 'business auxiliary service' as defined under Section 65(19) or the Finance Act, 1994. They have also imposed penalties on the party. After hearing both sides and considering their submissions, we note that the appellants were receiving steel plates and sheets from M/s. BHEL (principal manufacturer), converting the same into autoweld beams/boxes and supplying these goods to M/s. BHEL. They were undertaking a job work for the principal manufacturer. They were not paying duty of excise on the beams/boxes, which were converted into excisable goods by M/s. BHEL, who paid duty on the final product. As per the definition of 'business auxiliary service' as amended with effect from 10.9.2004, production of goods on behalf of client was a taxable service provided the activity does not amount to 'manufacture' within the meaning of Section 2(f) of the Central Excise Act. In this case, the appellant's contention is that their activity for the period of dispute (10.9.2004 to 28.2.2005) did amount to manufacture and hence not taxable under the Finance Act, 1994. The basic question, therefore, is whether the activity undertaken by the appellants would amount to manufacture or not. What the appellants did was to convert the steel plates and sheets into beams/boxes, which are goods distinct and different in character from the inputs used. Even according to the Revenue, these beams/boxes are 'intermediates' in the process of conversion of the plates and sheets to the ultimate product of the principal manufacturer (M/s. BHEL). This would amount to admitting that the appellants were converting inputs to intermediate products, in which event it cannot be gainsaid that the process amounted to manufacture. The basic condition under Section 65(19) of the Finance Act, 1994 for rendering 'production of goods on behalf of client" taxable has prima facie not been satisfied in this case. In the result, there will be waiver of predeposit and stay of recovery in respect of the amounts of tax and penalties.