2020 (2) TMI 515 - AT - Service Tax

Nature of activity - manufacture or service - processing and packing of marine products for merchant exporters - whether the activity of the appellant can be termed as taxable service under the provisions of Finance Act, 1994 as Business Auxiliary Service or the activity can be called as a manufacture as defined under the provisions of Central Excise Act, 1944? - HELD THAT - It is not in dispute that the processes undertaken by the appellant on the marine products are intended to render such products marketable to consumers. Therefore the appellant s activity falls under the definition of manufacture and not as taxable service falling under BAS. Both the authorities have not properly appreciated the processes explained by the appellant vis- -vis the Chapter Note 3 of Chapter 16 CETA, 1985. The definition of BAS is also examined and it is found that the activities carried out by the appellant do not fall under the BAS as defined under Section 65(19) of the Finance Act - Further as far as demand of service tax on renting of immovable property is concerned, we find that if the other activity carried on by the appellant amounts to manufacture, the demand of service tax on renting of immovable property amounting to ₹ 3,59,574/- will fall in the threshold limit and is exempt and the appellant is not liable to pay service tax on that. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
- Multiple appeals filed against Commissioner(Appeals) orders rejecting appellant's appeals.
- Determination of whether appellant's activities constitute taxable service or manufacturing under relevant laws.

Analysis:

Issue 1: Appeals against Commissioner(Appeals) Orders
The appellants filed four appeals challenging orders passed by the Commissioner(Appeals) rejecting their appeals. The appeals involved demands confirmed, dropped, or upheld along with interest and penalties. The Tribunal decided to consolidate the appeals due to identical issues involved in all four cases. The facts of one appeal, ST/493/2009, were considered for discussion and disposal for convenience.

Issue 2: Classification of Appellant's Activities
The main issue revolved around determining whether the appellant's activities amounted to taxable services under the Finance Act, 1994, specifically Business Auxiliary Service, or if they could be classified as manufacturing under the Central Excise Act, 1944. The appellant, a public limited company engaged in processing and packing marine products, argued that their activities constituted manufacturing as per Chapter Note 3 of Chapter 16 of the Central Excise Tariff Act, 1985. They detailed the processes involved, emphasizing the transformation of raw materials into value-added products for export.

Legal Analysis:
The Tribunal examined the processes explained by the appellant and the relevant legal definitions. It noted that the activities undertaken by the appellant aligned with the definition of manufacture as provided in Section 2(f) of the Central Excise Act, 1944. The appellant's processes aimed to make the products marketable to consumers, falling within the ambit of manufacturing. The Tribunal highlighted that the decision in Sterling Foods Vs. State of Karnataka and another was inapplicable to the current case as it pertained to Sales Tax, not Central Excise or Service Tax. Additionally, the Tribunal found that the appellant's activities did not qualify as Business Auxiliary Service under Section 65(19) of the Finance Act.

Conclusion:
After considering submissions from both sides and reviewing the material on record, the Tribunal concluded that the appellant's activities were rightly classified as manufacturing, not taxable services. Therefore, the impugned orders were deemed unsustainable in law, leading to the appeals being allowed in favor of the appellant. The demand for service tax on renting of immovable property was also addressed, with the appellant found exempt from paying service tax in that regard.

This comprehensive analysis of the legal judgment highlights the key issues involved and the Tribunal's detailed reasoning and decision-making process.