By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Whether process of denting & painting done by job worker inside the factory of vehicle manufacturer would be taxable under “business auxiliary service”?
Facts:
The appellant was undertaking certain jobs within the factory of JCBL Ltd. which was manufacturing bus bodies falling under Chapter-8707 of the Central Excise Tariff. The revenue was of the view that, the above activity amounted to “production or processing of goods for, on behalf of the client” as specified under the definition of “Business Auxiliary Service” and service tax was payable. The contention of the appellant was that the appellant was doing the activity in the factory of the manufacturer of excisable goods and these activities being incidental and ancillary to manufacture was covered by the definition of manufacture and such processes are specifically defined to be ‘manufacture’ in Section Note 6 of Chapter XVII of the Central Excise Tariff Act (CETA). Alternatively, they were eligible for exemption from service tax on such activity under Notification 8/2005-ST dated 01-03-2005 which provides exemption to job-workers doing processes when the principal manufacturer pays excise duty on the goods so produced. In the present case, JCBL paid excise duty on the bus bodies.
Held:
The JCBL’s factory manufactured bus bodies. The process of denting and painting were essential for completion of manufacture of bus bodies and the Tribunal did not find any reason to hold that these processes cannot be considered to be part of manufacturing activity within the meaning of section 2(f) of the Central Excise Act, 1944. Tribunal observed that Note 6 of Chapter XVII of CETA, these processes were essential for transforming the semi finished bus body into a complete and finished article. So if the process done by the appellant alone was seen, then also the argument of Revenue fails. The respondents denied the claim of the appellant for exemption under Notification 8/2005-ST on the reasoning that the appellant did not produce any evidence of duty payment of goods manufactured by JCBL Ltd. which was also not acceptable as they did these jobs within the factory of JCBL who regularly submitted excise returns to the excise department which also administers service tax levy. In absence of department establishing anything to the contrary, the appellant could not be penalised. Appeal as such was allowed.
