TMI Blog2008 (8) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... them, under the Heading Business Auxiliary Services rendered during the period from 10-9-2004 to 30-6-2005. In addition, penalty of identical amount stands imposed under Section 78 of the Finance Act, 1994 along with imposition of penalty under Section 76 and 77 of the Finance Act, 1994. Appropriate interest in terms of Section 75 of that Act also stands confirmed. 2. As per facts on record, the appellant is engaged in the activity of applying Fusion Bonded Epoxy Coating (FBE Coating) on reinforced steel bars supplied by their customers. Said activity was undertaken by them on job work basis. The bars are received from their customers, who are mainly construction companies like L T Ltd., Hindustan Construction Ltd. The process of FBE coating undertaken by the appellant is as under: (a) Duty paid bars received from the customers, are cleaned in Short Blasting Machine using steel shot of abrasives. (b) Bars are heated to around 220 to 240 C in induction heater. (c) Epoxy powder is sprayed over the heated bars by Electrostatic Spray guns housed inside the Coating Booth. (d) Epoxy powder on contact with hot bars melts and fuses with the shot blasted heated bar sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as done 'on behalf of the client'. The expression 'on behalf of the client' necessarily implies a three party arrangement viz., the producer, the client and the person for whom the goods are produced. Therefore, where the production of goods is undertaken by the agent on behalf of the principal for supply to a third party, that situation alone would be covered by the expression 'on behalf of the client'. In the present case, the relationship between the appellant and the customer is that of principal to principal and not principal and agent. The appellant is not acting as an agent of the principal. Further, are no three party arrangement involve in the present case. Appellant is processing the goods on job work basics which would not come under the category of 'production of good on behalf of the client'. In respect of the above submission, reliance stands placed on Board's Circular No. B2/8/2004-TRU dated 10-9-04. It has further been contended that the said entry was amended with effect from 16-6-05 and the scope was enlarged. Section 65(19) relating to business auxiliary services was amended to read 'production or processing of goods for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same would not be held as covered by the expression 'production'. Relying upon the observations made by the Hon'ble Bombay High Court in the case of Commissioner of Service Tax v. Sesa Goa Ltd. - 2004 (266) ITR 126, learned SDR submits that it was held that the production is different from manufacture and expression 'processing of iron ore' not amounting to manufacture was held as 'production' even though the ore remains ore, it was held that production has taken place. Similarly, in the present case though pipe remains pipe, which amounts to manufacture but it can certainly be held by the expression 'production'. Further arguing, the learned SDR submits that the appellants were admittedly undertaking activity 'on behalf of the client' inasmuch as they were neither buying nor manufacturing bars nor selling the same but were undertaking activity 'on behalf of the clients'. As such, they are covered by the 'Business Auxiliary Service' definition. Further, the learned SDR submits that the amendment in 2005 expanded the entry by bringing in the 'processing of goods as one of the activities' attracting service tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re' or 'processing'. The Hon'ble Supreme Court had an occasion to deal with the said terms as enumerated in various dictionaries and the precedent decisions. In para 19, the Hon'ble Supreme Court observed that the expression produced was given a wider meaning than the word manufacture pointing out that the word produced will include an activity of manufacturing the materials by applying human endeavour on some existing raw material, but the word 'produce' may include securing certain produce from natural elements, for example, by growing plants on soil, or by operating mines and the like or for example, by milching the cow etc. It was further observed in p 20 that the word production or produce , when used in juxtaposition with the word manufacture takes in bringing into existence new goods by a process which may or may not amount to manufacture. Reliance was further placed by the learned Advocate on Calcutta High Court decision in the case of Commissioner of Income Tax v. Hindustan Metal Refining Works (P) Ltd. - (1981) 128 ITR 472 (Calcutta) in support of his submission that both the words manufacture and production apply to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Act would become otiose. A cumulative reading of the definition and the definition in sub-rule (v) given at the end leads to only one and inevitable conclusion that the 'production of goods', which may not amount to manufacture in strict sense of Section 2(f) would also be covered by the said category of services. So, even if the Tribunal has held in their own case that activity undertaken by them does not amount to manufacture in terms of Section 2(f), the same would not mean the same may not amount to 'production' of goods in the light of the definition Business Auxiliary Service . In fact, we may have some insight of the Legislative intent by giving careful thought to the above definition. It seems that legislation was aware of the overlapping of the two expressions 'production' and 'manufacture' and in their wisdom, they have excluded the activities of production of goods which may amount to manufacture within the meaning of Section 2(f) of the Central Excise Act from the said definition. The use of different expression i.e. production of goods which may not amount to manufacture, by the Legislature, in its wisdom, only throws light upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other existing taxable services . 12. Learned SDR submits that admittedly, the appellants are not buying, producing the new coated bars themselves, neither are they selling the coated bars in the market. Said activity of coating is being done by them for others and as such, it has to be held as if the same has been done on behalf of their clients. 13. We find that the coating is being done by the appellants on the bars supplied by M/s. L. T and M/s. H.C.C. who have been awarded the contract for construction of roads, bridges etc. As per the terms and specifications prescribed by M/s. Maharashtra State Road Development Corporation Ltd. to the main contractors that is M/s. H.C.C. and M/s. L T, the said contractors shall produce certificate from FBE Coating agencies that the quality of powder epoxy material and other components of FBE conform to relevant I.S. Standard. Such certificates shall accompany each lot of coated bars leaving the plant for work site. The contractor may also carry out such tests at plant jointly or separately of coating agency to confirm use of proper quality of coating material. The coated reinforced bars shall be tested at plant site by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant period. However, the quantum of such tax is required to be re-quantified by extending the benefit of Cenvat credit of duty on coating material used for epoxy coating and the credit in respect of other input services as available during the relevant period. Though the said plea stands accepted by the Commissioner in his impugned order on principle, the same stands rejected on the ground that no documents were produced in support of the above claim. Surprisingly, the Commissioner while observing that the appellant shall produce documentary evidence in support of this claim before the jurisdictional Central Excise officer, who shall allow such benefit in accordance with law after verifying the genuineness of the documents has confirmed the demand of duty as proposed in the notice without extending the benefit. We are of the view that there being no dispute about availability of the said benefit, the demand of duty is required to be re-quantified. 16. The appellants have further submitted that the services provided prior to 10-9-04, that is, when the levy of business auxiliary service came into effect are required to be excluded. The Commissioner has denied the benefit on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
