2024 (3) TMI 853 - AT - Service Tax

Nature of activity - manufacture or service - making of photo books/albums, calendars, brochures etc. to their different customers - whether the activity of the assessee amounts to manufacture or whether it falls under photography service prior to 1.7.2012 and whether would fall under the definition of service for the period w.e.f 01.07.2012 to 30.07.2015? - HELD THAT - The issue stands covered by the decision of the Tribunal in the case of M/S. VENUS ALBUMS CO. PVT. LTD. VERSUS CCE, CHANDIGARH/LUDHIANA/AMRITSAR 2018 (11) TMI 754 - CESTAT CHANDIGARH . The Tribunal in the said case analyzed the issue relating to the very same activity and held that the activity would amount to manufacture and does not fall under service . The activity carried out by assessee amounts to manufacture . The demand of service tax cannot therefore sustain. The impugned order to the extent of confirming the demand, interest and imposing penalties is set aside. Appeal allowed.

Summary

Issues Involved:
1. Whether the activity of the assessee amounts to 'manufacture' or 'photography service' prior to 1.7.2012.
2. Whether the activity falls under the definition of 'service' for the period from 01.07.2012 to 30.07.2015.

Summary:

Issue 1: Classification of Activity Prior to 1.7.2012
The assessee is engaged in printing photos, images, and other materials into photo books, calendars, and similar products. The Department argued that these activities fall under 'Photography Services' and are liable for service tax. The assessee contended that their activities amount to 'manufacture' as they produce new commercial commodities distinct from the raw materials used, citing the Supreme Court's criteria in Union of India Vs J.G. Glass Industries. The Tribunal, referencing the Venus Albums Private Ltd. case, agreed with the assessee, stating that the transformation of digital images into printed photo books constitutes 'manufacture' under Chapter 49 of the Central Excise Tariff Act, 1985, which attracts nil duty rate.

Issue 2: Classification of Activity Post 1.7.2012
For the period from 01.07.2012 to 30.07.2015, the Department maintained that the activity should be classified as 'service' under Section 65B (44) of the Finance Act, 1994. However, the Tribunal found that the activity still amounts to 'manufacture' based on the same reasoning as above. The Tribunal emphasized that the assessee's activity results in a new commodity, thus falling under Chapter 4911 and not under taxable 'service'.

Conclusion:
The Tribunal concluded that the assessee's activities amount to 'manufacture' and not 'service'. Consequently, the demand for service tax, along with interest and penalties, was set aside. The assessee's appeal was allowed with consequential relief, and the Department's appeal was dismissed. This decision was in line with the judicial precedent set by the Venus Albums Private Ltd. case, which was affirmed by the Supreme Court.