2011 (2) TMI 465 - AT - Service Tax

Demand - business auxiliary services - When the activity of bottling of alcohol amounted to manufacturing activity in terms of the provisions of section 2(f) of the Central Excise Act, in which case no Service Tax can be levied on them - in the case of Maa Sharda Wine Traders v. Union of India 2008 -TMI - 34140 - MADHYA PRADESH HIGH COURT has held that packaging and bottling of liquor is covered by the definition of manufacture as defined in section 2(f) of Central Excise Act, 1944 and will not attract any service tax liability - Appeal is allowed

Summary

Issues:
Whether the activities of bottling alcohol amount to cargo handling 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. The revenue raised concerns that the activities undertaken by the appellant could be categorized as cargo handling services or business auxiliary services for different periods. A show-cause notice was issued to the appellant demanding Service Tax, education cess, interest, and penalties.

The appellant contested the show-cause notice, arguing that bottling alcohol constituted a manufacturing activity under the Central Excise Act, exempting them from Service Tax liability. The Commissioner (Appeals) acknowledged that the activities did not fall under cargo handling services but held the appellant liable for Service Tax under business auxiliary services. The Commissioner interpreted the definition of 'manufacture' under the Central Excise Act to exclude the liquor produced by the appellant from excisable goods, making them subject to State Excise duty and not Central Excise duty.

The Tribunal referred to a previous judgment by the M.P. High Court supporting the revenue's case but highlighted a subsequent Larger Bench decision in the case of Maa Sharda Wine Traders, which ruled that packaging and bottling of liquor constituted manufacturing under the Central Excise Act and did not attract service tax liability. The Tribunal, in line with the Larger Bench decision, overturned the Commissioner's order, stating that packaging and bottling of liquor fell within the definition of manufacture and, therefore, exempt from service tax.

Conclusively, the Tribunal set aside the Commissioner's order, allowing the appeal based on the finding that the activities of bottling alcohol did not amount to cargo handling or business auxiliary services, thereby exempting the appellant from Service Tax liability. Other grounds raised by the appellant were not addressed as the appeal was allowed on this primary ground.