2024 (12) TMI 842 - AT - Service Tax

Liability of appellant or the job workers to pay service tax on the activity of packing of its bulk pack into retail pack - wages calculation shows the amount reflected in the profit and loss account by Shri Chandan Kakati, Contractor - Contractor, Shri Pradip Das, has registered with the man power supply services with the Department - extended period of limitation. Liability of appellant or the job workers to pay service tax on the activity of packing of its bulk pack into retail pack - HELD THAT - Admittedly, the item which is manufactured falling under Chapter 30 and 33 of the Central Excise Tariff Act, 1985. The Chapter Note 6 5 of Chapter 30 and 33 respectively defines the manufacture as contained in Section 2 (f) of the Act that the activity of packaging of finished goods from bulk to retail packs amounts to manufacture . Therefore, the activity of packing of its bulk into retail pack, amounts to manufacture. Therefore, no service tax is payable by the other appellants or the job workers. In this case, the case has been made out against the appellant on the basis of the statement recorded during the investigation - on the basis of statement recorded during the course of investigation without testifying the same under Section 9D of the Act, the service tax cannot be demanded from the appellant. Another reason for demanding service tax from the appellant is that the wages calculation shows the amount reflected in the profit and loss account by Shri Chandan Kakati, Contractor - HELD THAT - The classification of the activity is to be decided in accordance with the law laid down by the Parliament not by the manner in which the assessee is maintaining its accounts. In that circumstances, the nomenclature given by the contractor does not have any binding effective clause of the activity undertaken by them. Admittedly, the activity of packing of its bulk pack into retain pack, the said activity amounts to manufacture in terms of Section 2 (f) of the Central Excise Act, 1944. Therefore, on this ground, the service tax cannot be demanded shown as packing charges. Another reason for demanding service tax is that the Contractor, Shri Pradip Das, has registered with the man power supply services with the Department - HELD THAT - In fact, the activity undertaken by the assessee is not disputed that they are doing packing of bulk into retail packs. Mere taking registration from the GST Department and the trade license from the Licensing Commissioner, does not classify the activity undertaken by the assessee. Liability of service tax - HELD THAT - It is held that mere activity undertaken by the appellant is packing of bulk pack into retail pack, which amounts to manufacture in terms of Chapter Note 6 5 of Chapter 30 and 33 of the Central Excise Tariff Act, 1985. Therefore, the activity undertaken by the appellant amounts to manufacture and if the activity amounts to manufacture, on the said activity, the service tax cannot be charged and the same is out of the purview of the service tax provisions. Thus, no service tax is payable by the appellant. As no service tax is payable by the appellants, consequently, no penalties can be imposed on the appellants - whole of the demand of service tax along with interest and the penalties imposed on the appellants set aside. Time limitation - HELD THAT - It is found that some of the demand has been confirmed by invoking extended period of limitation. As the activity itself is a activity of manufacture, therefore, it is not a case of suppression of facts by the appellants and it is only the issue of interpretation of law. Therefore, the extended period of limitation is also not invokable. The impugned order is set aside - appeal allowed.

Issues Involved:

1. Liability of the appellant and contractors to pay service tax on the activity of packing bulk goods into retail packs.
2. Validity and evidentiary value of statements recorded during investigation.
3. Classification of the activity as "manufacture" under the Central Excise Act, 1944.
4. Applicability of service tax based on registration and trade licenses.
5. Invocation of the extended period of limitation for service tax demands.
6. Imposition of penalties on the appellants.

Detailed Analysis:

1. Liability to Pay Service Tax:

The core issue was whether the appellant or the job workers were liable to pay service tax on the activity of packing bulk goods into retail packs. The judgment established that the activity of packaging goods from bulk to retail packs amounts to "manufacture" as defined under Chapter Note 6 and 5 of Chapter 30 and 33 of the Central Excise Tariff Act, 1985, and Section 2(f) of the Central Excise Act, 1944. Consequently, this activity falls outside the purview of service tax provisions, and no service tax is payable by the appellants.

2. Evidentiary Value of Statements:

The demand for service tax was based on statements recorded during the investigation. These statements were retracted and not tested under Section 9D of the Central Excise Act, 1944, rendering them inadmissible as legal evidence. The judgment emphasized that without proper examination, such statements hold no evidentiary value, and service tax cannot be demanded based on them.

3. Classification as "Manufacture":

The classification of the activity was contested, with the department arguing it as manpower supply services. However, the judgment clarified that the classification of activities must align with legislative definitions, not the manner in which accounts are maintained or the nomenclature used by the contractors. The activity of packing bulk goods into retail packs was affirmed as "manufacture," thus exempt from service tax.

4. Registration and Trade Licenses:

The department's reliance on the contractors' registration under "manpower supply" services and trade licenses was deemed insufficient to classify the activity. The judgment noted that mere registration or obtaining a trade license does not determine the nature of the activity undertaken. The actual activity performed was packing, which constitutes "manufacture."

5. Extended Period of Limitation:

The judgment addressed the issue of limitation, noting that some demands were confirmed by invoking the extended period. It was concluded that since the activity was classified as "manufacture," there was no suppression of facts by the appellants. The issue involved interpretation of law, and thus, the extended period of limitation was not applicable.

6. Imposition of Penalties:

Given that no service tax was payable due to the classification of the activity as "manufacture," the judgment held that penalties could not be imposed on the appellants. The absence of service tax liability negated the basis for penalties.

Conclusion:

The judgment set aside the entire demand for service tax along with interest and penalties imposed on the appellants. It was pronounced that the activity in question amounted to manufacture, and thus, was outside the scope of service tax provisions. Consequently, the appeals were allowed with consequential relief.

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