2018 (7) TMI 692 - AT - Service Tax

Business Auxiliary Service - LDPE lamination of unlaminated HDPE / PP woven fabrics received from various units - demand of service tax on the ground that the activity of lamination does not amount to manufacture - Held that - The process of lamination carried on HDPE/PP fabrics, paper bags and cotton fabrics etc. amounts to manufacture within the meaning of section 2(f) of Central Excise Act, 1944 - demand of service tax do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the activity of lamination of HDPE/PP fabrics, paper bags, and cotton fabrics amounts to manufacture or not.

Analysis:
The appellant was engaged in the manufacture of polymer-coated sacks, multi-wall papers, and HDPE laminated sacks. The department contended that the lamination activity undertaken by the appellant did not amount to manufacture and thus attracted service tax under Business Auxiliary Service. The original authority confirmed the demand, interest, and penalties, which was upheld by the Commissioner (Appeals), leading to the current appeal.

The appellant argued that the lamination process of HDPE/PP fabrics and other materials constituted manufacture under the Central Excise Act, as it transformed the materials into leak-proof, marketable products. They cited precedents like Moneeto Plasti-Fab Pvt. Ltd. and Laminated Packings (P) Ltd. to support their claim. On the other hand, the department reiterated that no new product emerged after lamination, hence not constituting manufacture.

After hearing both parties, the Tribunal analyzed the issue in light of the appellant's registration for manufacturing excisable goods and relevant notifications exempting job worked goods from service tax when the process amounts to manufacture. Referring to previous cases like Moneeto Plasti Fab Pvt. Ltd. and Laminated Packings P. Ltd., where lamination was considered manufacturing, the Tribunal concluded that the lamination process on various fabrics indeed amounted to manufacture under the Central Excise Act. Accordingly, the demand for service tax on this process was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, determining that the lamination activity on HDPE/PP fabrics, paper bags, and cotton fabrics constituted manufacturing under the Central Excise Act. The decision was based on precedents and the understanding that the lamination process transformed the materials into distinct marketable products, thus exempting the appellant from the service tax demand.