2013 (12) TMI 910 - AT - Service Tax

Waiver of pre-deposit of Service tax - Penalty u/s 77 & 78 - Activity of packaging of paper - Held that - packing activity in terms of sub-section 76(b) includes packaging of goods but does not include any packaging activity that amounts to manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944. Said Section 2(f)(iii) defines manufacture as a process which involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers or adoption of any other treatment on the goods to render the product marketable to the consumer - inasmuch as the paper becomes marketable only after the same is duly packed in the wrapping paper, the said activity has to be held as manufacturing activity - appellant has a good prima facie case in its favour so as to allow the stay petition unconditionally - Stay granted.

Summary

Issues:
- Request to dispense with pre-deposit of Service tax amount confirmed against the applicant and penalty imposed under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
The judgment revolves around the application seeking exemption from the condition of pre-deposit of a confirmed Service tax amount and penalty imposed on the appellant. The confirmed amount pertained to the activity of packaging paper produced by another company. The appellant argued that the packing activity should be considered a manufacturing activity, thereby exempting it from Service tax liability. The definition of 'manufacture' under Section 2(f)(iii) of the Central Excise Act, 1944 was crucial in determining whether the appellant's actions constituted manufacturing or packaging. The Tribunal analyzed the definition and concluded that the appellant's activity fell under manufacturing, not packaging, as it involved processes that rendered the product marketable to consumers.

The Tribunal noted that the appellant had a strong prima facie case in their favor regarding the nature of the activity. Considering the arguments presented and the interpretation of the relevant legal provisions, the Tribunal decided to grant the stay petition unconditionally. This decision was based on the understanding that the appellant's activity aligned more with manufacturing than with packaging, as defined in the applicable laws. The judgment highlights the importance of precise legal definitions in determining tax liabilities and the need for a thorough analysis of activities to ascertain their classification under the law.