2023 (9) TMI 1441 - AT - Service Tax

Process amounting to manufacture or not - activity of blending, labeling, packing and re-packing of 'Horlicks' - section 2(f) (iii) of the Central Excise Act, 1944 read with chapter note 5 of chapter 19 of CETA, 1985 - HELD THAT - The appellant undertakes the activity/processing on the bulk malt based powder, received from GSK thereafter removal of unwanted particles from the bulk malt based powder to make it fit for human consumption. Then processing/blending of the bulk powder with sweetened milk powder, sugar, vitamins etc. to make it marketable in the finished form and then packing of the final manufactured product either in pouches or in jars having brand name of 'Horlicks' on it. The said activity undertaken by the appellant do qualify as process of manufacturing in terms of section 2(f) of the Central Excise Act, 1944 as the activity undertaken by the appellant brings about a change in the name, character and use and bringing a new product in the market which is known as 'Horlicks', therefore, the activity undertaken by the appellant is manufacturing activity and the appellant is a manufacturer in terms of section 2(f) of the Central Excise Act, 1944. Thus, it cannot be said that the appellant is a job-worker and providing 'Business Support Service' and no demand of service tax can be raised against the appellant - the impugned order qua demand of service tax from the appellant that they are service provider post June 2012 and prior to 2012, the appellant was providing 'Business Support Service', is not sustainable - there are no merit in the impugned order - appeal allowed.

Summary

Issues involved: Determination of whether the activity of blending, labeling, packing, and re-packing of 'Horlicks' by the appellant amounts to manufacture in terms of the Central Excise Act, 1944.

Summary:

Facts of the case: The appellant entered into an agreement with Glaxo SmithKline Consumer Healthcare (GSK) to carry out job work, receiving conversion charges for manufacturing and packing 'Horlicks' for GSK, availing exemption of excise duty. The revenue disputed this, issuing show cause notices for service tax on conversion charges.

Appellant's arguments: The appellant claimed to be a manufacturer entitled to exemption, citing past orders recognizing them as a manufacturer. They argued that the activity amounts to manufacturing of goods and relied on legal precedents supporting their position.

Revenue's stance: The revenue supported the demand for service tax as per the impugned order.

Decision: After considering the submissions and facts, the Tribunal held that the appellant's activities of processing the malt-based powder into 'Horlicks' constituted manufacturing as per the Central Excise Act. The Tribunal found that the appellant's processes brought about a change in the product, making them a manufacturer eligible for exemption. Therefore, the demand for service tax was deemed unsustainable, and the impugned orders were set aside, allowing the appeals with any consequential relief.

This summary provides a detailed breakdown of the issues involved, the arguments presented by both parties, and the final decision of the Appellate Tribunal CESTAT KOLKATA regarding the activity of the appellant in manufacturing 'Horlicks'.