2018 (9) TMI 177 - AT - Service Tax

Packaging service or Manufacture? - packing of salt in retail pack - Held that - In the present case, the only activity is packing of salt in retail pack not the complete manufacturing of salt by the appellant - it is liable for service tax being not a manufacturing activity - appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the packaging activity of salt amounts to manufacturing under the Finance Act, 1997?
2. Whether the Standards of Weights and Measure Rules are relevant for determining manufacturing activity under Section 2(f) of the Central Excise Act, 1944?
3. Whether the judgments cited by the appellant are applicable to the present case regarding the packaging of salt?

Analysis:

Issue 1:
The appellants argued that packaging salt constitutes manufacturing under Section 2(f)(i) as it is incidental to completing the product. They relied on judgments like New Era Handling Agency vs CST and CCE vs Eastend Paper Industries Ltd. The appellant contended that packaging salt in retail packs makes the product complete, thus amounting to manufacturing. However, the Tribunal found that the salt received by the appellants was already manufactured in bulk form, and repacking it into retail packs did not qualify as incidental to completing a manufactured product. Since salt was not specified under IIIrd Schedule or had a relevant chapter note, the packing activity did not amount to manufacturing. The Tribunal upheld that the packaging service defined under Section 65(25) of the Finance Act, 1994 made it liable for service tax, affirming the impugned order.

Issue 2:
The Revenue argued that the Standards of Weights and Measure Rules were not relevant for determining manufacturing activity under Section 2(f) of the Central Excise Act, 1944. They referred to a judgment involving Proctor and Gamble Home Products where compliance with Package Commodity Rules was held not to constitute manufacturing. The Tribunal concurred, stating that Section 2(f) did not stipulate compliance with such rules as a criterion for manufacturing activity. Therefore, the Standards of Weights and Measure Rules were deemed irrelevant in deciding manufacturing activity under Section 2(f).

Issue 3:
Regarding the judgments cited by the appellant, the Tribunal distinguished the cases of New Era Handling Agency and Eastend Paper Industries Ltd. from the present scenario. The Tribunal noted that the statutory requirements for packaging in those cases were not applicable to the packaging of salt. The judgment of New Era Handling Agency was deemed inapplicable due to differing factual circumstances. Similarly, the case of Eastend Paper Industries Ltd. was found irrelevant as it involved the complete manufacturing process, unlike the sole activity of repacking salt in the present case. Consequently, the Tribunal dismissed the appeal based on the specific facts and legal provisions applicable to the packaging of salt.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD provides a comprehensive overview of the issues raised and the Tribunal's reasoning behind the decision.