Printing and Dyeing Services Exempt Under Mega Exemption Notification: CESTAT Quashes Service Tax Demand on Job Work

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed a service tax demand of ₹2.66 lakh, holding that the activity of printing and dyeing fabrics on a job-work basis was exempt from service tax under Entry 30 of Mega Exemption Notification No. 25/2012-ST. The bench of P. K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) while dyeing and printing are integral processes in the manufacture and finishing of textile products and constitute intermediate production processes performed on a job-work basis. Consequently, the exemption was held applicable. The dispute arose after the Service Tax Department received third-party financial information from the Income Tax Department relating to the assessee's receipts during the financial year 2015-16. Based on this information, authorities sought details regarding services rendered by the appellant and subsequently issued a show cause notice demanding service tax of ₹2,66,971 on gross receipts of ₹18.41 lakh, along with interest and penalties. According to the department, the receipts reflected in income tax records were not disclosed in the appellant's service tax returns, leading to allegations of non-payment of service tax. The demand was confirmed by the adjudicating authority, which also imposed an equivalent penalty under Section 78 of the Finance Act, 1994, along with multiple penalties under Section 77. The Commissioner (Appeals) later upheld the order, prompting the assessee to approach the Tribunal. The appellant contended that he was engaged exclusively in the business of dyeing and printing textile fabrics supplied by customers. The materials were received under challans, processed according to customer specifications, and returned after completion of the job work. Bills were raised only for the processing activity. The appellant argued that such textile processing activities qualified as job work and were specifically exempt from service tax under Entry 30 of Notification No. 25/2012-ST, commonly known as the Mega Exemption Notification. Therefore, no service tax liability could be imposed on the receipts earned from these activities. The department's case was largely based on a comparison between income declared before the Income Tax Department and figures disclosed in service tax returns. Authorities treated the receipts as taxable consideration for services and sought to recover service tax, interest and penalties. However, the Tribunal noted that apart from the discrepancy between income tax records and service tax returns, no independent evidence had been produced to establish that the receipts related to taxable services rather than exempt job-work activities. A crucial factor that influenced the Tribunal's decision was a subsequent adjudication involving the same assessee for the financial year 2016-17. In that case, the department had raised a similar demand of ₹1.89 lakh based on gross receipts of ₹12.61 lakh. However, the Assistant Commissioner, after examining documentary evidence, dropped the entire proceedings. The adjudicating authority in the later case had extensively reviewed challans, invoices, declarations and contractual documents and concluded that the appellant was genuinely engaged in textile processing job work involving printing and dyeing of fabrics. The authority further held that such activities were exempt under Entry 30 of Notification No. 25/2012-ST. After examining the records and hearing both sides, the Tribunal found that the facts involved in the present appeal for FY 2015-16 were identical to those considered in the appellant's own case for FY 2016-17. The Bench observed that the subsequent adjudication order had already recognized the appellant's activities as exempt job-work services related to textile processing. Since the nature of work, business model and supporting documentation remained the same, there was no reason to sustain the demand for the preceding year. Relying on the findings recorded in the later proceedings, the Tribunal concluded that the impugned orders confirming service tax liability could not survive. It accordingly set aside the orders passed by the lower authorities. Allowing the appeal, the CESTAT held that the appellant's printing and dyeing activities performed on fabrics supplied by customers constituted exempt job-work services covered by the Mega Exemption Notification. As a result, the service tax demand, interest and penalties were rendered unsustainable. The Tribunal granted consequential relief to the appellant in accordance with law. Case Details Case Title: M/s Rakesh Mani Versus Commissioner CGST & Central Excise, Kanpur Citation: JURISHOUR-1555-CES-2026(ALL) Case No.: Service Tax Appeal No.70114 of 2023 Date: 02.06.2026 Counsel For Appellant: Tanmay Sadh, Advocate Counsel For Respondent: A. K. Choudhary, Authorized Representative Click Here To Read Order Read More: Supreme Court Exempted RWAs, Clubs and Housing Societies From GST

Printing and Dyeing Services Exempt Under Mega Exemption Notification: CESTAT Quashes Service Tax Demand on Job Work

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