Custom, Excise & Service Tax Tribunal
Gujarat Insecticides Ltd vs Bharuch on 15 January, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
SERVICE TAX Appeal No. 10922 of 2016-DB
[Arising out of Order-in-Original/Appeal No BHR-EXCUS-000-COM-080-15-16 dated
29.03.2016 passed by Commissioner of Central Excise, Customs and Service Tax-Bharuch]
Gujarat Insecticides Limited .... Appellant
Plot No. 805-806, GIDC Estate, Ankleshwar,
BHARUCH, GUJARAT-393002
VERSUS
Commissioner of Central Excise & ST, Bharuch .... Respondent
Vadodara-II,GST Bhavan, Subhanpura, Vadodara Vadodara, Gujarat-390023 APPEARANCE :
Shri M G Yagnik, Advocate for the Appellant Shri Rajesh R. Kurup, Superintendent for the Respondent CORAM: HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) DATE OF HEARING /DECISION: 15.01.2024 FINAL ORDER NO. 10175/2024 C.L. MAHAR :
Brief facts of the matter are that the appellant has entered into an agreement with M/s. Gharda Chemicals Limited for exclusive use of their plant with all manpower along with common infrastructure facilities. As per the terms of agreement, the appellant has to provide their plant for exclusive use of M/s. Gharda Chemicals Limited for manufacture of various chemicals falling under Chapter 28, 29 and 38 of first schedule of Central Excise Tariff Act, 1985. The department entertained a view that the appellant have provided service of Management, Maintenance or Repair Service to M/s. Gharda Chemicals Limited and accordingly a show cause notice dated 13.04.2015 came to be issued whereunder service tax amounting to Rs. 87,08,182/- has been demanded as per the provisions of Section 73(1) of Finance Act, 1994 for the service namely Management, Maintenance or Repair Service and the penal provisions under Section 76 and 77 have also been invoked. The matter has been adjudicated vide impugned order-in-original dated 29.03.2016 by the learned Commissioner whereunder the charges as invoked in the show cause notice have been 2 Appeal No. ST /10922/2016-DB confirmed. The appellant are before us against the above mentioned order- in-original.
2. The learned Advocate appearing for the appellant at the outset submitted that the appellant are primarily engaged in the manufacture of various chemicals falling under Chapter 28, 29 and 38 of the first schedule to Central Excise Tariff Act, 1985 on job work basis to M/s. Gharda Chemicals Limited and they are not providing any service under Management, Maintenance or Repair Service and therefore, the impugned order-in-original is misconceived by considering the manufacturing activity as service under the category of Management, Maintenance or Repair Service. It has further been contended that M/s. Gharda Chemicals Limited are providing all the inputs and packing material free of charge to the appellant and the appellant by utilizing their plant, equipment and machinery, labour, supervisor, water and electricity, manufacturing excisable goods and the same are being supplied back to M/s. Gharda Chemicals Limited. It has further been mentioned that M/s. Gharda Chemicals Limited is following the procedure as laid down under rule 4(5)(a) of the Cenvat Credit Rules, 2004 whereunder all the inputs received were received by them under job work challans and after processing the same, the manufactured goods are supplied back to the principal manufacturer namely M/s. Gharda Chemicals Limited.
3. Learned Counsel submits that undertaking the above activity of job work, M/s. Gharda Chemicals Limited has been compensating the appellant with job work charges as elucidated in the agreement. The Learned Counsel has also contended that as per the provisions of Section 65(105)(zzb) of the Finance Act, 1994 the process involving manufacture are excluded from the purview of service tax as the activity does not fall under Business Auxiliary Service. It has further been mentioned by the learned Advocate that matter has already been decided in their own case by this Tribunal vide its Final Order Nos. A/10706/2023 dated 24.03.2023 and No. A/11905/2023 dated 11.09.2023.
4. We have also heard the learned Departmental Representative who has admitted that matter is no longer res-integra and the issue has already been 3 Appeal No. ST /10922/2016-DB decided by this Tribunal in the appellant's own case vide above mentioned final orders.
5. We have heard both the sides and we find that the matter is concerned, the matter is squarely covered by Final Order No. A/10706/2023 dated 24.03.2023 holding that the activity undertaken by the appellant is a manufacturing activity of the excisable goods. As per the definition of Business Auxiliary Service provided under Section 65 (105) (zzg) of the Finance Act, 1994, the manufacturing activity of excisable goods under Section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of Business Auxiliary Service and therefore, the demand of service tax is not sustainable in this case. It will be relevant to reproduce the operative portion of final order dated 24.03.3034 as below:-
"4. On careful consideration of the submissions made by both the sides and perusal of the record, we find that there is only difference of period in the present case and the case which was decided by this Tribunal vide order dated 06.02.2023. Therefore, except for the period, all the facts are same and therefore as per the judicial discipline we have to follow this Tribunal's order No. A/10212/2023 dated 06.02.2023 wherein this Tribunal has passed the following order:-
"4. We have carefully considered the submission made by both sides and perused the records. We find that the demand was confirmed under the head of Management, Maintenance & Repair Service as per section 65(105) (zzg) of the Finance Act, 1994. The Management, Maintenance & Repair service is defined under section 65 (64) of the Finance Act, 1994 which is reproduced below:-
"(64) "Management, maintenance or repair" means any service provided by --
(i) Any person under a contract or an agreement; or
(ii) A manufacturer or any person authorised by him, in relation to,
(a) Management of properties, whether immovable or not;
(b) Maintenance or repair of properties, whether immovable or not; or
(c) Maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle Explanation.--For the removal of doubts, it is hereby declared that for the purposes of this clause-
(a) "goods" includes computer software;
(b) "properties" includes information technology software"
From the plain reading of the above definition of Management, Maintenance & Repair Service the main condition is that the Management, Maintenance & Repair Service of the plant should belong to the service recipient and not to the service provider. In the present case the order impugned has held the appellant as service provider and Gharda Chemicals Ltd as service recipient. It is also not disputed that it is the service recipient M/s GCL is paying for the use of manufacturing facilities of the appellant for manufacture of the excisable goods of M/s Gharda chemicals. In this fact the appellant using their own plant 4 Appeal No. ST /10922/2016-DB machinery equipment that too for production of excisable goods on behalf of M/s Gharda chemical Ltd. In this undisputed fact by any stretch the activities of the appellant cannot be classified under Management, Maintenance & Repair Service. Moreover, the activity per se cannot be treated as service itself for the reason that the activities carried out by the appellant is purely of manufacture of excisable goods with the inputs and packaging material supplied by the GCL and the said manufacturing was done on job work basis on behalf of M/s GCL.
4.1 The principle manufacturer M/s GCL has supplied the input and packing material to the appellant under Rule 4(5)(a) of Cenvat Credit Rules, 2004. It is further established that the activities carried out by the appellant is of manufacture of excisable goods on job work basis. The principle manufacturer M/s. GCL is under legal obligation to discharge the excise duty on the job work goods received by them from the appellant. The show cause notice has not alleged that the principle manufacture has not cleared their final product without payment of excise duty. Accordingly the activities at the most can be classified under sub clause of production or processing on behalf of the client under business auxiliary service.
4.2 Firstly, when the principle manufacturer and appellant as job worker complied with the conditions prescribed under Notification No. 08/2005- ST even if it is treated as business auxiliary service the same is exempted under the said notification, Secondly, when the demand was raised under Management, Maintenance & Repair Service and as per our opinion it is not the correct classification the demand is not sustainable on this ground itself. The adjudicating authority put heavy emphasis on the fact that the entire plant was used exclusively for production of goods of GCL. Therefore, the service is classified under Management, Maintenance & Repair Service. As we already observed above that since the plant machinery equipment used for the purpose of production belongs to the appellant, the service is not classified under Management, Maintenance & Repair Service. Further, the activities carried out by the appellant are undoubtedly production of goods on job work basis on behalf of GCL. This position will not alter irrespective of fact that whether the plant, machinery &equipment are used exclusively for GCL or partly for GCL or partly for others, therefore, on this basis the activity cannot be classified as Management, Maintenance & Repair Service.
4.3 We further find that the activity of the appellant is indeed manufacture of excisable goods in terms of section 2(f) of CEA, 1944. As per the definition of business auxiliary service manufacture of excisable goods in terms of section 2(f) of the Central Excise Act, 1944 is clearly excluded from the definition of business auxiliary service. For this reason also, the demand of service tax is not sustainable.
5. As per our above discussion and finding the impugned order as a whole is not sustainable, hence we set aside the impugned order. The appeal is allowed with consequential relief."
5. In view of the above decision in the appellant's own case, the issue is no longer res-integra. Accordingly, following the above decision, in the present case the impugned order is set-aside the appeal is allowed."
5Appeal No. ST /10922/2016-DB
6. In view of the above, we hold that impugned order-in-original is without any merits and thus not sustainable. Hence, the impugned order is set-aside and the appeal is allowed.
(Operative part of the order pronounced in the open court) (Sulekha Beevi C.S.) Member (Judicial) (C L Mahar) Member (Technical) KL