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Whether bottling of liquor amounts to manufacture of liquor or only packaging so as to attract the Service Tax? |
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| 18-6-2009 | |||
Brief Facts: The petitioner purchases bottles of country spirit from the licensees who are engaged in the manufacture and supply of country liquor in sealed bottles pursuant to the license issued by the competent authority of the State Government under the provisions of the M.P. Excise Act, 1915 [for short 'the 1915 Act'] and the Rules framed therein. The rectified spirit is manufactured by the process of distillation in the distillery, the rectified spirit is blended in the warehouses, bottled, sealed labelled and is supplied to the retail contractors. According to the writ petitioner, the process of manufacturing involves various stages, viz., manufacture of rectified spirit at distilleries; transportation of rectified spirit from distilleries to manufacturing warehouses; manufacturing activity (blending) to make rectified spirit fit for human consumption; bottling, sealing, packaging of country spirit. It is contended that after the rectified spirit is rendered fit for human consumption the same is filled in bottles or some other packing mode as specified by the Excise Commissioner under the supervision of the Officer-in-Charge of the warehouses and sealing of the bottles is carried out as per specification and labels are affixed on each bottle and thereafter on demand of retail contractors and upon proof of payment into treasury of the issue price recoverable for it, the CS-1 license issues bottles of country spirit to the retail contractor. The 1915 Act contains provisions with regard to the manufacture, supply and sale of liquor. Contention of the petitioner: It is contended that if Section 65(76b) of the Finance Act and Section 2(f) of the Central Excise Act, 1944 (for short 'the 1944 Act') are read in a purposive manner, it would be clear as crystal that service tax as provided under the Finance Act would not be leviable on the manufacturing activity of country liquor, for the bottling is an integral and essential part of the process of manufacturing. Earlier Decision of Division Bench of High Court: "……….Thus it is a service part of the activity which is being taxed, which is independent of the process of manufacture and cannot be said to be integral part of process of manufacture as excluded in section 65(76)(b) inserted by the Finance Act, 2005 read with section 2(f) of the Central Excise Act……." Service tax is payable on impugned activity Relevant Circulars of CBEC Final Decision of Full Bench of High Court "The decision rendered in M/s. Vindhyachal Distilleries (supra) does not state the law correctly inasmuch as it has expressed the opinion that packaging and bottling of liquor are not the part of manufacturing process and hence, liable to service tax and we uphold the view taken in Som Distilleries (2009 -TMI - 33817 - MADHYA PRADESH HIGH COURT) and, therefore, rule that packaging and bottling of liquor come within the ambit and sweep of manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944 in view of the definition contained in Section 65(76b) of the Finance Act especially keeping in view the exclusionary facet and further regard being had to the circular issued by Central Board of Excise and Customs."
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