By TIOL News Service

NEW DELHI, JAN 20, 2017: THE appellant is engaged in providing business support services to manufacturers of export garments. Such manufacturers are outsourcing the activities of verification and examination of various stages of manufacturing of readymade garments meant for exports. The manufacturer of garments appointed the appellant namely AT & Co. to perform the activities of examination of garments on a random basis, (i) At the fabric stage(ii) At the stitching stage and (iii) At the packing stage

The appellant discharges the service tax liability for above services under the category of Business Support Services w.e.f. 01.05.2006 i.e. from the day when these services were introduced in the taxable category. The department issued show cause notice dated 03.10.2007 to the appellant for the total amount of Rs. 1,07,91,448/- of service tax under the category of Technical inspection and certification services w.e.f. 01.07.2003 till 31.03.2007.

After hearing both side, the Tribunal held:

+ The appellant is randomly examining the garments at various stages like fabric stage, stitching stage and packing stage, but they are not giving any kind of certification with respect to pre determined standards / characteristics or parameters. When the outcome of the examination / inspection carried out does not result into some certification, the subject services cannot be covered by the services under the category of "technical inspection and certification". The department's stand that the subject services are covered under the definition of technical inspection and certification services as defined by section 65(108) of Finance Act 1994, therefore, cannot be sustained.

+ Further, the department has failed to indicate any standards or characteristics or parameters relying on which, if any, certification is being issued by the appellant. The appellant is only giving reports along with their recommendations after making examination of the garments at various stages. So, these reports and recommendations which are the outcomes of services rendered by the appellant do not lead to any certification and cannot be covered by the technical inspection and certification services covered under section 65(108) of the Finance Act 1994. The department has already been charging service tax for the services rendered by the appellant under the category of business support services from 01.05.2006. Therefore, the attempt of the Revenue to charge service tax on the said services under the category of technical inspection and certification services, when the technical inspection and certification services was brought into the taxable net under section 65(105)(zzi) cannot be sustained in the eyes of the law. Impugned order set aside allowing the appeal.

(See 2017-TIOL-181-CESTAT-DEL)