2016 (4) TMI 627 - AT - Service Tax

Waiver of pre-deposit - Demand of Service tax alongwith interest and penalties - Business auxiliary service to BANAS Dairy - Appellant contended that labelling or re-labelling of containers and re-packaging from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture and hence not liable to service tax - Held that - the payment has received on the basis of per liter of the products packed in pouches and it is not possible nor is there any mechanism to identity the payments as would relate to each component of service enumerated earlier. Prima facie the essential activity is that of pasteurizing of milk, converting some of it into butter milk/curd and then packing these products including milk in plastic pouches and these activities clearly amount to manufacture in terms of Chapter Note 6 to Chapter 4 of Central Excise Tariff. It is pointed out that under section 2(f) of Central Excise Act, 1944 manufacture includes any process which is specified in relation to any goods in the Section or Chapter Notes to the Central Excise Tariff as amounting to manufacture. therefore, complete waiver granted. - Stay granted

Summary

Issues:
Stay application against service tax demand on business auxiliary services provided to BANAS Dairy.

Analysis:
The appellant sought a stay against the service tax demand confirmed on the grounds of providing business auxiliary services to BANAS Dairy. The services included various activities like weighment, storage, pasteurization, packing, delivery, cleaning, and testing of milk, among others.

The appellant argued that their activities amounted to manufacturing as per Chapter Note 6 to Chapter 4 of Central Excise Tariff, exempting them from service tax liability. They contended that pasteurizing, converting milk into curd/butter milk, and packing the products constituted manufacturing.

The Departmental Representative (DR) opposed, claiming that pasteurization alone did not amount to manufacturing. Moreover, the service provided involved multiple components beyond just pasteurization and packing, constituting a taxable service.

The Tribunal considered both arguments and found merit in the appellant's contention. They agreed that activities like pasteurizing, converting milk, and packing products in pouches amounted to manufacturing under the Central Excise Tariff. The Tribunal noted that the payment received was based on the quantity of products packed, making it difficult to segregate payments for each service component.

Referring to Section 2(f) of the Central Excise Act, the Tribunal emphasized that any process specified in the Chapter Notes to the Central Excise Tariff as manufacturing would be exempt from service tax. They concluded that the essential activities performed by the appellant fell under the definition of manufacturing, justifying a waiver of the pre-deposit and staying the recovery of the tax liabilities during the appeal process.