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ST - Activity of conversion of black bars into bright bars & clearance of same as manufactured product cannot become non-manufactured when appellant undertakes jobworking for some other clients so as to be held as liable to ST under BAS: CESTAT

By TIOL News Service

MUMBAI, JUNE 04, 2015: DURING the period 10.09.2004 to 28.2.2005 appellant was registered with the Central Excise department as a duty paying unit and was discharging appropriate duty on the black bars manufactured by them. Due to exigencies of business and in order to utilize the spare capacity, the appellant undertook the conversion of black bars into bright bars on job work basis and received processing charges.

The adjudicating authority as well as the lower appellate authority held that the said job work activity is chargeable to Service Tax under the category of Business Auxiliary Service by taking a view that conversion of black bars into bright bars is not a manufacturing activity as held by the Apex Court.

The appellant is before the CESTAT.

The Bench observed -

+ In the entire records we find that the Revenue has not disputed the fact of discharge of excise duty on the very same item manufactured and cleared by the appellant on their account. It is surprising to note that the first appellate authority has not considered this vital submission of the appellant as to when the same goods are manufactured by the same process, how the said process cannot become manufactured out of job working.

+ In our considered view, the self same activity of conversion of black bars into bright bars on their account and clearance of the same on discharging duty as manufactured product cannot become a non-manufactured product when the appellant undertakes jobworking for some other clients.

+ Yet another angle is that appellant had vide their letter dated 04.01.2005 made a reference to the Dy. Commissioner of Central Excise as to whether the process adopted by them would qualify as "production of goods on behalf of clients" as defined under Business Auxiliary Service or it would qualify as manufacture.

+ There was no response from the department on this query raised by the appellant. The show-cause notice issued in this case is on 13.10.2008 for the period 10.09.2004 to 28.02.2005 which in our view is blatantly time barred and cannot invoke suppression against the appellant.

Holding that the order is not sustainable, the same was set aside and the appeal was allowed with consequential relief.

(See 2015-TIOL-1023-CESTAT-MUM)


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