2015 (8) TMI 306 - AT - Service Tax

Waiver of pre deposit - Activity of chilling of milk - Business Auxiliary Service - appellant was providing service of chilling of milk to M/s. Sriganganagar Zila Dugdh Utpadak Sahakari Sangh Ltd. - Held that - Decision in the case of M/s. Sharma Ice Factory 2014 (6) TMI 493 CESTAT New Delh followed - appellant has made out a good case for waiver of pre-deposit and we order accordingly staying recovery of the impugned liability during pendency of the appeal - Stay granted.

Summary

Issues:
Service tax demand under Business Auxiliary Service for chilling of milk.

Analysis:
The judgment revolves around a Stay Application and Appeal filed against an Order-in-Appeal that upheld a service tax demand of Rs. 8,43,728 for the period from 26.04.2005 to 10.05.2010 related to chilling of milk. The contention was whether chilling of milk constitutes Business Auxiliary Service as per Section 65(19) of the Finance Act, 1994. The appellant cited a previous CESTAT decision in the case of M/s. Sharma Ice Factory where a similar demand was set aside.

The Departmental Representative argued that chilling of milk, while not a manufacturing process, falls under Business Auxiliary Service. However, the tribunal, without delving into the merits of the case, referred to the previous decision in M/s. Sharma Ice Factory case. The previous decision highlighted that chilling of milk for transportation purposes does not amount to production or processing of goods, as it does not bring about any permanent or temporary change in the milk other than lowering its temperature. The tribunal emphasized that for an activity to be considered production, there must be a change in the raw material resulting in a new product with distinct characteristics, commercial identity, and usages. Since chilling of milk does not bring about any such change, it was held that it does not amount to production or processing of goods not amounting to manufacture. The tribunal also noted that the Commissioner (Appeals) had previously ruled that chilling of milk is not covered under Business Auxiliary Service as per the Finance Act, 1994.

Based on the precedent set by the previous CESTAT decision, the tribunal concluded that the appellant had a strong case for the waiver of pre-deposit and ordered the stay of recovery of the disputed liability during the pendency of the appeal.