2011 (1) TMI 61 - AT - Service Tax

Cargo handing services - appellant is engaged in the manufacture of alcoholic liquor for human consumption on job work basis - undertaking the work and supervise all the operation after receipt of blended material and up to transfer of finished goods into the godown provided for the purposes of storage of finished goods at the plant and loading into trucks at the said plant for dispatch - Revenue entertained a doubt that the above activities undertaken by the appellant amounted to cargo handing services for the period 16.8.2002 to 9.9.2004 and to business auxiliary services for the period 10.9.2004 to 30.9.2006 - business auxiliary services, does not include any activity that amounts to manufacture within the meaning of Section 2(f) of the Central Excise Act - packaging and bottling of liquor come within the ambit and sweep of manufacture within the meaning of clause (f) of Section 2 of Central Excise Act, 1944 in view of the definition contained in Section 65(76b) of the Finance Act especially keeping in view the exclusionary facet Appeal allowed

Summary

Issues:
Whether the activities of bottling alcohol amount to cargo handling services or business auxiliary services for the purpose of levying Service Tax.

Analysis:
The appellant was engaged in manufacturing alcoholic liquor for human consumption on a job work basis for a specific company. They were also responsible for bottling the beverages at the company's plant, supervising operations, and arranging labor. The Revenue suspected these activities might fall under cargo handling or business auxiliary services, leading to a Show Cause Notice for Service Tax payment.

The appellant argued that bottling alcohol constituted manufacturing under the Central Excise Act, exempting them from Service Tax. The Commissioner (Appeals) acknowledged that cargo handling services were not performed initially but deemed the appellant liable for business auxiliary services later. He contended that the definition of manufacture should only apply to excisable goods, not those subject to State Excise duties, thus confirming the tax demand.

However, a precedent set by the M.P. High Court was challenged in a Larger Bench judgment, ruling that packaging and bottling of liquor do constitute manufacturing under the Central Excise Act, absolving them from service tax liability. This decision overruled the earlier High Court ruling and clarified the definition of manufacture under the law.

Consequently, the Appellate Tribunal set aside the Commissioner's order and allowed the appeal, citing the bottling activities as manufacturing and not subject to service tax. As the appeal succeeded on this ground, other raised issues were not addressed in the judgment.