By TIOL News Service

MUMBAI, NOV 26, 2013: AGAINST an order passed by the CCE, Nashik, the appellant is before the CESTAT with a Stay application.

The demands are -

+ Rs.9,51,400/- is confirmed on the ground that applicant had availed excess credit in respect of the input services which are used in the processing of the goods, which were cleared on payment of appropriate service tax and part of the goods are cleared at nil rate of Service Tax by claiming the benefit of exemption Notification No.8/2005-S.T. dt.1.3.2005.

+ Rs.61,57,105/- is confirmed on the ground that applicant availed credit in respect of common inputs and input services which are used in the processing of goods, which were cleared on appropriate payment of Service Tax and part benefit of Notification No. 8/2005-S.T.

It is submitted by the appellant that the processed goods cleared by claiming the benefit of notification No. 8/2005-ST were further cleared by the principal on payment of appropriate excess duty or by availing the benefit of small scale exemption notification. Reliance is also placed on the decision in the case of Tata Motors Vs. UOI - (2009-TIOL-665-HC-MUM-CX) in support of their claim. The ground of the demand being hit by limitation is also taken inasmuch as the appellant were filing statutory returns showing the clearance of processed goods by claiming benefit of Notification No. 8/2005-ST.

The Revenue representative submitted that the applicants are processing goods on behalf of the principal manufacturer and the process undertaken by the applicant does not amount to manufacture and hence the applicants are liable to pay service tax in the category of business auxiliary service; that the applicants are clearing part of the processed goods by claiming the benefit of Notification No. 8/2005-ST at nil rate of service tax; however, applicants availed credit in respect of common inputs as well as input service which are used for processing of goods and the part of goods were cleared by claiming benefit of Notification and hence they are liable to pay 6% / 8% of the price of the exempted goods as per the provisions of Rule 6 of the CCR. Inasmuch as the demand is rightly made. As regards the submission that the demand is time barred, it is submitted that since the applicants wrongly availed the benefit of notification, the extended period is invokable.

The Bench observed -

"8. We find that the applicants are not disputing the fact that part of the processed goods are cleared at nil rate of Service Tax by availing the benefit of exemption. It is also not disputed by the applicant, that credit has been availed in respect of the common inputs as well as input services, which are used in the processing of exempted as well as the processed goods on which the Service Tax has been paid. The applicants relied upon decision of Tata Motors (supra). We find that in the case of Tata Motors Revenue wants to deny credit in respect of the credit of duty paid in respect of the inputs procured by job worker on the ground that job worker was clearing the goods by claiming the benefit of Notification No. 214/86-CE. In this situation, the Hon'ble High Court held in favour of the job worker. In the present case, the applicants are undertaking process which does not amount to manufacture and in view of this the applicants are clearing part of their processed goods on payment of appropriate service tax. In view of this, prima facie the applicant has not made out a case for waiver of service tax. The ratio of the above decision is not applicable to the facts of the present case. During the arguments the applicants submitted that the demand for the normal period comes to approximately Rs.12 lakhs."

Holding that the applicant has not made out a case for total waiver of demand of service tax, the Bench directed that a pre-deposit of Rs.12 lakhs be made and compliance reported.

Interesting days ahead!

(See 2013-TIOL-1756-CESTAT-MUM)