2008 (6) TMI 108 - AT - Service Tax

In view of decision of Madras HC in the case of CCE v. Vinbros and Company, held that blending and bottling of Indian Made Foreign Liquor amounts to manufacture as the end-product is commercially different from rectified spirit which is not fit for human consumption - therefore, appellant are not liable for Service tax under business auxiliary service - prima facie, we find that the applicant have a strong case in their favour stay granted

Summary

Issues:
1. Waiver of pre-deposit of Service Tax and penalties for business auxiliary service including production or processing of goods.
2. Interpretation of the definition of manufacture under Section 2(f) of the Central Excise Act in the context of blending and bottling of Indian Made Foreign Liquor.

Analysis:
1. The applicant sought a waiver of pre-deposit of Service Tax and penalties related to the provision of business auxiliary service involving the production or processing of goods for clients. The demand was confirmed based on the applicant being considered a provider of such services.

2. The applicant argued that although the production or processing of goods on behalf of a client falls under business auxiliary service, activities amounting to manufacture as per Section 2(f) of the Central Excise Act are not covered under this definition. Citing a decision of the Hon'ble Madras High Court in a specific case, the applicant contended that blending and bottling of Indian Made Foreign Liquor should be considered manufacturing, as the end-product is distinct from the original and recognized in trade as a new commodity.

3. The Revenue, on the other hand, contended that the definition of manufacture includes processes incidental to the completion of a manufactured product or those specified in tariff notes, and since Indian manufactured foreign liquor is not specified in the tariff, the applicant's activities do not amount to manufacture under Section 2(f) of the Central Excise Act, making them liable for Service Tax as business auxiliary service.

4. The Tribunal noted the decision of the Hon'ble Madras High Court, which supported the applicant's position that blending and bottling of Indian Made Foreign Liquor constitutes manufacture. Considering this, the Tribunal found that the applicant had a strong case in their favor. Consequently, the pre-deposit of Service Tax and penalties was waived, and stay petitions were allowed.

This detailed analysis of the judgment addresses the issues of waiver of pre-deposit for business auxiliary services and the interpretation of the definition of manufacture under the Central Excise Act in the context of blending and bottling of Indian Made Foreign Liquor, providing a comprehensive understanding of the legal reasoning and decision-making process involved in the case.