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Conversion of steel plates into partially finished and fully finished boiler components - Prima facie case for waiver of demand of service tax under Business Auxiliary Service: CESTAT

By TIOL News Service

CHENNAI, AUG 07, 2014: THE applicant is a job worker of M/s. Bharat Heavy Electricals Ltd. (BHEL). The nature of process involved is cutting, drilling, pressing, welding etc., as per the drawings of conversion of steel plates into partially finished and fully finished boiler components. According to the Revenue, the process undertaken by the applicant, would not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 and, therefore, they are liable to pay service tax under “Business Auxiliary Service”. Adjudicating authority confirmed the demand along with interest and penalty.

After hearing both sides and on perusal of the records, the Tribunal held:

M/s. BHEL filed a declaration under Notification No.214/86-CE, dated 01.03.1986 as amended from time to time, to the Deputy Commissioner of Central Excise, Division - Tiruchirapalli and submitted an undertaking the responsibility of discharging their liabilities in respect of the Central Excise Duty leviable on the final products including waste and scrap on the job work material.

The adjudicating authority observed that the job work material were not cleared as such but on the other hand subject to further manufacturing at the end of the customers before they are used/cleared as components of boilers and, therefore, does not amount to manufacture at the premises of the applicant.

In the Verification Report, by the Range Superintendent, it is reported that the raw materials such as MS Plates, MS Pipes and MS Roads were supplied to the applicant by their customers along with Purchase Order, Delivery Challans and drawings and processes were undertaken by the applicant as per the drawing supplied by their customers and the resultant job worked materials were cleared under Delivery Challans and invoices under the name as specified in the Purchase Orders.

It is noted that the applicant also claimed the benefit under Service Tax Notification No.8/2005-ST, dated 01.03.2005.

In the present case, the applicant undertook the job work on behalf of their client M/s. BHEL There is no dispute that the job work materials used in relation or in relation to the manufacturer of the components of boiler. Prima facie, the present case is covered by Exemption Notification No.8/2005-ST, dated 01.03.2005. In view of the same, pre-deposit is waived till disposal of the appeal.

(See 2014-TIOL-1443-CESTAT-MAD)


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