Anand Engineering Products (P) Vs. Cce (St) - Court Judgment

Excerpt:
1. the lower authorities have demanded service tax of over rs. 29.00 lakhs from the appellants in respect of a gross amount received by them from m/s. akzo nobel [contractors engaged by the buyer of the goods manufactured and supplied by the appellants] towards labour charges for surface preparation and painting of the goods viz. windmill, which was exempt from payment of duty of excise during the period of dispute [10.9.2004 to 31.3.2006]. they have also imposed equal amount of penalty on the appellants. after examining the records and hearing both sides, we note that the windmills were manufactured and supplied by the appellants to their buyers under contracts, wherein it was stipulated that the scope of the work was to fabricate the towers (windmills) in accordance with relevant.....

Judgment:
1. The lower authorities have demanded service tax of over Rs. 29.00 lakhs from the appellants in respect of a gross amount received by them from M/s. Akzo Nobel [contractors engaged by the buyer of the goods manufactured and supplied by the appellants] towards labour charges for surface preparation and painting of the goods viz. windmill, which was exempt from payment of duty of excise during the period of dispute [10.9.2004 to 31.3.2006]. They have also imposed equal amount of penalty on the appellants. After examining the records and hearing both sides, we note that the windmills were manufactured and supplied by the appellants to their buyers under contracts, wherein it was stipulated that the scope of the work was to fabricate the towers (windmills) in accordance with relevant drawing and to undertake surface treatment and painting of the structure in coordination with the buyer's painting contractor, at the appellants' premises. Even in the impugned order, there is an averment of the appellate Commissioner to the effect that the surface preparation and painting was also part of the manufacture of the windmills. It is the case of the appellants, reiterated today by learned Counsel, that no part of the process of manufacture can be subjected to levy of service tax. The final product viz. windmill towers manufactured by the appellants were exempted from payment of duty, as observed in the impugned order. Surface preparation and painting were part of the job awarded by the buyer. On these facts, we have found prima facie case for the appellants against the demand of service tax on an amount received by them in respect of a part of the process of manufacture. Accordingly, there will be waiver of predeposit and stay of recovery in respect of the amount of tax and penalty.