2025 (6) TMI 1592 - AT - Service Tax

Nature of activity - service or manufacture - fabrication work done by the appellants - HELD THAT - At the relevant time the goods being fabricated by the appellants were bringing into existence what would have been normally excisable goods being manufactured articles liable to Central excise duty but for the exemption as contained in 12/2012-CX which made them exempt goods . The issue is answered in affirmative holding that what is excisable at the relevant time could not have been subjected to service tax if that be so the appeals are allowable - appeal allowed.

Summary

The core legal issue considered by the Tribunal was whether the fabrication work carried out by the appellants constituted manufacture of excisable goods or provision of taxable services under the relevant tax statutes.

The factual matrix reveals that the appellants engaged in fabrication of large parts of wind mills during the period from 2014-15 to June 30, 2017, which were subsequently sold to a third party. The charges received by the appellants were solely for fabrication services, excluding the cost of materials supplied by the service recipient. The dispute centered on the classification of this activity for taxation purposes, specifically whether it amounted to manufacture of goods liable to central excise duty or provision of services subject to service tax.

The relevant legal framework comprised Central Excise Notification No. 12/2012-CX dated 17.03.2012, which exempted certain goods related to non-conventional energy devices, including wind operated electricity generators and their components, from excise duty. Entry No. 13 of the exemption list specifically covered "wind operated electricity generator, its components and parts thereof including rotor and wind turbine controller."

In support of their contention that the fabricated parts were excisable goods, the appellants relied on a precedent from the Tribunal's Chennai bench, which interpreted the scope of exemption under the same notification. The cited decision analyzed components such as tower, rotor, nacelle, and wind turbine controller and held them to be parts of wind operated electricity generators eligible for exemption. The decision also addressed related components like anchor rings and load spreading plates, concluding that these were integral parts of the tower assembly and thus exempt.

The Tribunal noted that the Commissioner (Appeals) had primarily focused on whether the appellants were providing a service rather than scrutinizing the scope of the exemption notification and the nature of the fabricated goods. The appellants' argument emphasized that the goods fabricated were inherently excisable but exempt under the notification, and therefore, service tax could not be levied on the fabrication work.

Upon examination, the Tribunal found that the goods fabricated by the appellants were indeed excisable goods within the meaning of the notification. The exemption rendered these goods non-liable to excise duty, and consequently, the activity of fabrication could not be treated as a taxable service. The Tribunal applied the legal principle that where goods are excisable but exempt, the activity of manufacture cannot be subjected to service tax, avoiding double taxation.

The Tribunal rejected the remand request by the Additional Commissioner (AR) and proceeded to allow the appeals, holding that the appellants' fabrication work amounted to manufacture of exempted excisable goods rather than provision of service. The appeals were allowed with consequential relief.

Significant holdings include the Tribunal's explicit affirmation that "what is excisable at the relevant time could not have been subjected to service tax," thereby establishing that fabrication of parts qualifying as exempted excisable goods falls outside the ambit of service tax. The Tribunal relied on the detailed analysis of the exemption notification and supporting precedent to conclude that the fabricated components were parts of wind operated electricity generators eligible for exemption.

This judgment underscores the principle that the classification of an activity as manufacture or service hinges on the nature of the output and the applicable statutory exemptions. It clarifies that fabrication resulting in excisable goods exempted under a notification cannot be taxed as a service, thereby preventing overlapping tax liabilities.