2017 (2) TMI 893 - AT - Central Excise

Manufacture - packing and labelling business - assessee-Appellants packed 10 Nos. of 35 ml Clinic Plus Shampoo bottles in a Pet Jar and shrink-sleeving the jar and affixing the label containing the product details on the lid of the jar - Held that - the activity of the assessee-Appellants is of manufacture and falls within the category of Section 2(f)(iii) of the Central Excise Act 1944. During the period under consideration no duty is leviable as the Department never raised any objection which is an implied consent for having the Service Tax from the assessee-Appellants. Appeal disposed off.

Summary

Issues:
1. Dispute over whether the activity of packing and labeling constitutes manufacturing under Central Excise Act, 1944.
2. Whether the assessee-appellants should be liable for Service Tax or excise duty.
3. Interpretation of Section 2(f)(iii) of the Central Excise Act, 1944 regarding packing and labeling activities.
4. Consideration of the bonafide belief of the assessee-appellants in paying Service Tax.
5. Assessment of double jeopardy and time-barred refund of Service Tax.

Analysis:
1. The case involved cross appeals against a common Order-in-Appeal dated 31.08.2012 by the Commissioner (Appeals) concerning the period from August 2009 to March 2010. The dispute centered around whether the packing and labeling activity conducted by the assessee-appellants constituted manufacturing under the Central Excise Act, 1944.

2. The Department considered the activity as manufacturing, while the Commissioner (Appeals) observed it as such but dropped the demand due to the assessee-appellants' regular payment of Service Tax without objection. Both parties filed cross appeals, leading to a hearing where arguments were presented by the Department and the counsel for the assessee-appellants.

3. The assessee-appellants had been paying Service Tax regularly during the disputed period, declaring the activity as a service and enjoying acceptance by the Department without objection. The contention was made that the banding activity fell under 'manufacturer' as per relevant sections and tariff notes, emphasizing the primary manufacturing nature over the service element.

4. Reference was made to legal precedents to support the argument that the assessee-appellants' activity should be considered manufacturing, especially in light of the Service Tax payments made in good faith. The principle of not punishing twice for the same offense was highlighted, along with the assertion that no duty was leviable during the period due to implied consent from the Department.

5. Ultimately, the Tribunal found that the activity of the assessee-appellants fell under the category of manufacturing as per Section 2(f)(iii) of the Central Excise Act, 1944. The Tribunal upheld the Commissioner (Appeals) decision, emphasizing the bonafide belief of the assessee-appellants in paying Service Tax and dismissing both cross appeals. The judgment was pronounced on 06.01.2017, concluding the legal proceedings in this matter.