2015 (4) TMI 1003 - AT - Service Tax

Manufacturing activity or Packaging Services - appellants, manufacturers of country liquor, were also engaged in the activities of bottling, labelling, affixing the hologram stickers and sealing of glass bottles of country liquor - Held that - Appellants had been manufacturing and clearing alcoholic beverages. It is also not the Revenue s case that the appellants were only doing packaging activities and the processes prior to packaging were done by someone else. In these circumstances, the appellants are clearly manufacturers of liquor. Indeed manufacturers of any product which involves packaging for clearance are never held to be providing packaging services because while every process of manufacture may not amount to manufacture, Manufacture includes any process incidental or ancillary to the completion of a manufactured product as per Section 2(f) of Central Excise Act, 1944. Thus for a manufacturer of goods, packing them (prior to their clearance) is a process of manufacture and not provision of service. In the case of Maa Sharada Wine Traders (2008 (3) TMI 319 - MADHYA PRADESH HIGH COURT), the M.P. High Court has categorically held that manufacturing process does not necessarily include excisable goods, but also includes process incidental or ancillary to completion of manufactured product. - Following this decision - Decided in favour of assessee.

Summary

Issues: Appeal against service tax demand for packaging services in the manufacturing of liquor.

Analysis:
1. Issue: Whether the activities of bottling, labelling, affixing hologram stickers, and sealing glass bottles of country liquor constitute packaging services.
- Analysis: The Revenue contended that the services provided by the appellants fall under the category of Packaging Services, leading to the confirmed demand. The appellants argued that these activities were part of the manufacturing process and not separate packaging services. The Tribunal noted that the appellants were manufacturers of liquor, and the processes of bottling and packaging were integral to the manufacturing process. The Tribunal relied on the definition of manufacture under the Central Excise Act, stating that packing goods before clearance is a process of manufacture, not a service.

2. Issue: Applicability of judicial precedents in similar cases.
- Analysis: The appellants cited judgments in cases like Maa Sharda Wine Traders and Kedia Castle Delleon Industries Ltd. to support their argument. The Tribunal examined the M.P. High Court's decision in Maa Sharada Wine Traders, which held that bottling and packaging of liquor are part of the manufacturing process and not liable to service tax. The Tribunal emphasized that additional activities beyond those covered in previous cases would still be considered part of the manufacturing process, following legal precedents.

3. Conclusion: The Tribunal allowed the appeal and set aside the impugned order, ruling in favor of the appellants. The decision was based on the understanding that the activities in question were integral to the manufacturing process of liquor and not standalone packaging services. The Tribunal's analysis highlighted the legal interpretation of manufacturing processes and the applicability of judicial precedents in determining tax liabilities.