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2023 (8) TMI 854 - AT - Service TaxLevy of Service tax - business auxiliary service - tax on the gross amount received by the appellant for manufacture and supply of the drugs - drugs manufactured by the appellant are exempted from payment of central excise duty - HELD THAT:- From the facts stated in the show cause notice it is not under dispute that the activity of manufacturing of drugs on behalf of the principle is an excisable activity in terms of Section 2 (f) of Central Excise Act, 1944. The demand was confirmed on the very same activity under the category of Business Auxiliary Service and sub head “production of goods on behalf of the clients”. It can be seen that in clause (v) of the definition of Business Auxiliary Service, though the production of goods on behalf of the client is a taxable service, however, any activity that amounts to manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 is out of the ambit of the definition of Business Auxiliary Service. The Revenue has completely misunderstood the definition of business auxiliary service particularly with regard to the service of production of goods on behalf of the client. From the definition it is absolutely clear that all such production activities which are other than the activity of manufacture in terms of Section 2 (f) of Central Excise Act, 1944 are alone shall be taxable activity under the head of production of goods on behalf of the client under Business Auxiliary Service. Therefore, in the present case the activity admittedly amounts to manufacture of excisable goods i.e., drugs which is clearly covered under Section 2 (f) of Central Excise Act, 1944 cannot be classified as taxable service under business auxiliary service. The Revenue while demanding the service tax also taken the support from the exemption Notification No. 08/2005-ST contending that since the appellant’s manufacturing activity is exempted from excise duty, the exemption Notification No. 08/2005- ST is also not available - here the activity does not fall under the definition of business auxiliary service since the same is excisable manufacturing activity in terms of Section 2 (f) of Central Excise Act, 1944 the Notification 08/2005 – ST is absolutely irrelevant in the present case. It is noteworthy that the said notification is only relevant when the service is taxable under Finance Act, 1994 which is not the case here as per discussion. The demand of service tax is not sustainable. Accordingly, the impugned order is set aside. Appeal is allowed.
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