2018 (7) TMI 1379 - AT - Service Tax

Business Auxiliary Service - activity of chilling undertaken by the assesses - deemed manufacture or not? - Held that - The process undertaken in the assesses s factories involves chilling the milk and maintaining it at appropriate temperature to prevent it from spoiling - The identical issue has come up before the Tribunal in the case of Vinayak Industries, 2016 (6) TMI 1072 - CESTAT NEW DELHI , where the Tribunal has observed that chilling of milk amounts to manufacture and it is settled law that process amounting to manufacture is not liable to service tax - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of service tax levy on chilling plant contractors providing services for milk supply.

Analysis:
The judgment by the Appellate Tribunal CESTAT New Delhi involved two appeals with similar facts regarding chilling plant contractors providing services for milk supply. The Department contended that the chilling activity by the assesses fell under the category of business auxiliary service, thus subject to service tax. One appeal saw the service tax levy dropped, leading to the Revenue's appeal, while the other upheld the tax payment. Both appeals were addressed together.

The Tribunal heard arguments from the Advocate for the assesses and the Departmental Representative. The Advocate argued that chilling milk constitutes a manufacturing activity as per Chapter 4, making it exempt from service tax. Citing relevant case laws, the Advocate emphasized that chilling renders milk marketable, aligning with the definition of 'manufacture' under Central Excise, thus excluding it from service tax liability.

After reviewing the records and arguments, the Tribunal noted that chilling milk for preservation without altering its nature significantly does not amount to production or processing of goods. Referring to a previous case, the Tribunal highlighted that chilling milk for transportation purposes, without introducing any substantial change, does not qualify as manufacturing. Consequently, the Tribunal dismissed the Revenue's appeal and allowed the appeal by the assessee, ruling in favor of the assesses.

In conclusion, the Tribunal's judgment clarified that chilling milk for preservation and transportation purposes does not fall under the purview of service tax, as it does not constitute manufacturing or processing of goods. The decision favored the assesses, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's appeal.