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TMI Blog2006 (4) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... ouch filling, bottling, labelling or imprinting of the package and it is clear that as per the conditions of tender notice separate charges are levied for this service, which is provided by the distillers as per1 conditions of tender notice. - 2346 / 2006 - - - Dated:- 29-4-2006 - Arun Mishra and Manjusha Namjoshi, JJ Appellant Represented by: Shri Kunal Thakre and Akshat Sharma Respondent Represented by: Shri Dharmendra Sharma, and O.P. Namdeo, GA for UOI Commissioner Central Excise, Shri Sanjay Yadav, Dy. AG, for the State of MP, Shri H.S. Shrivastava, Sr. Counsel with Girish Shrivasatava and Vijay Raghav Singh JUDGEMENT Per: Arun Mishra: In these writ petitions the question involved is whether service tax on packaging i.e. bottling and labelling of liquor, can be exacted from the distillers and whether they can pass on this liability to the contractors obtaining the supplies from them. 2. The petitioners are distillers/retail contractors, licence has been granted for supply of country made liquor for the warehouses situated in various districts of the State of Madhya Pradesh to distillers. The retail contractors take supply from the distillers under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate remedy as may be available in accordance with law. Whether service tax could be passed on, was not adjudicated upon. It is submitted that distiller has a right to pass on the service tax to the retail contractors. Service tax by nature is such a tax, which is meant to be passed on to the actual users. It was directed by District Excise Officer not to collect the service tax from the retail contractors. 5. It is further submitted that under the Madhya Pradesh Country Spirit Rules, 1995 the distillers are given a CS-1 licence to manufacture country spirit from rectified spirit by essencing, colouring, flavouring, reducing, blending etc. at the manufacturing warehouses. Colouring and flavouring agents are added at the time of maturation, This is a process of treatment given to over proof spirit in order to render it fit for human consumption in the form of country liquor. This process is manufacturing of country liquor in the real sense as well as within the meaning and scope of Central Excise Act, 1944 and M.P. Excise Act, 1915. It is further submitted that as the Packaging Activity is covered by and part of process of manufacture within the meaning of Clause (f) of Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it is correctly falling under the purview of service tax under the head of Packaging Activity Service w.e.f. 16-6-2005. It is further submitted on behalf of Central Excise that activity of bottling, labelling and sealing of (plain/spiced) country liquor are covered as a Packaging Activity and attracts service tax under Section 65(76){b) inserted by Finance Act, 2005. The tax is payable on the value of the taxable service received by the service provider. Accordingly such distillers/bottlers shall pay service tax being a service provider. The Central Excise can recover service tax from the distillers/service provider only. The Packaging Activity service is provided by Distillers/Bottlers by way of bottling the liquor and being transferred to wholesale or retail dealer/contractors etc. The dispute of passing liability of service tax onwards is inter se distillers and contractors. It can be recovered by distillers from contractors as per Rule 4A(1) of the Service Tax Rules, 1994. 7. The stand of the State Government counsel is that service tax is realised by Central Excise, it is the dispute between the distillers/contractors. A letter was issued pursuant to the directives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spirit separate billing is made, thus two activities are different. It has to be seen in the facts of the each case whether packaging activity forms part of process of manufacture when tender notice is considered. It is clear that it is an independent activity (service provided) and cannot be said to be part of process of manufacture under Section 2(f) of Central Excise Act. It can be passed on to the wholesalers/contractors being an indirect tax. 10. Shri Sanjay Yadav, learned Dy. Advocate General appearing for the State has submitted that the service tax is realised by the Central Excise. The State has no concern with the service tax, which is realised, hence dispute is inter se the distillers/contractors. He has also submitted that charges for bottling, labelling and sealing are fixed @ Rs. 2.25/- per piece. 11. The Packaging Activity has been defined in Section 65(76)(b) as inserted by the Finance Act, 2005 thus: - 65(76)(b) : packaging activity means packaging of goods including pouch filling, bottling, labelling or imprinting of the package, but does not include any packaging activity that amounts to manufacture within the meaning of clause (f) of Section 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of Clause (f) of Section 2 of the Central Excise Act, 1944, it is of the packaging activity under Section 65(76)(b). 12. When we consider the transaction in question, which is best reflected in the tender notice published in the gazette of M.P., pursuant to which distillers have been granted the licence for bottling and supply of country spirit in various districts of State of M.P. published in gazette notification dated 19-5-05. The tenderer is required to be a distiller holding appropriate licence for distillery from the competent authority and the distillery should be in production. Every intending distiller is free to tender for any one or more supply areas. Tenders are invited from the distillers for grant of licence under the provision of Madhya Pradesh Country Spirit Rules, 1995 to supply country spirit through bonded warehouses to the retail sale contractors in sealed bottles for a period commencing within seven days from grant of such licence and ending 31st March, 2006. The lowest rate was to be accepted. The production capacity was one of the relevant criteria. Every tenderer was required to follow certain conditions. No dues and credibility certificate regarding pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponsibility of the successful tenderer to receive the empty bottles from the retail contractor at the issue warehouses. (iv) The country spirit, bottles, labels and bottling caps should be of such good quality, standard pattern and specifications, as prescribed by the Excise Commissioner. (v) Charges for bottling, labelling; and sealing by pilfer proof cap of the glass bottles of volume 750 ml, 375 ml, 250 ml and 180 ml are fixed at Rs. 2.25 per piece. (vi) Rates of deposit money for empty glass bottles payable by retail contractors shall be as follows : Glass bottle of 750 ml : Rs. 3.50 Glass bottle of 375 ml : Rs. 2.25 Glass bottle of 250 ml [ M.P. Excise specially embossed] : Rs. 2.80 Glass bottle of 180 ml : Rs. 1.50 The deposit money is refundable to the retail contractor on return of glass bottles at the supply warehouse. (vii) The ratio of supply of country spirit in different sizes of glass bottles to the retail contractors in the area/areas is fixed as under : 750 ml : 10 375 ml : 20 250 ml and 180 ml : 70 The above ratio means that every 100-bulk liters of supply of country spirit to the retail contractor shall consist of 10-bulk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.N. Kalyana Mandapam Association v. Union of India and others 2006 (3) S.T.R. 260 (S.C.) - 2004 (167) E.L.T. 3 = (2004) 5 SCC 632 considered the question of imposition of service tax on Mandap Keepers, which were also providing the catering services in addition to the other activities. The Apex Court has laid down that service tax is a tax on services and not a tax on sale or purchase of goods. It was permissible to levy the service tax on the catering services provided by the Mandap Keepers. The submission that it amounts to tax on land, was rejected. The definition of taxable services provided by the Mandap Keepers is not limited to providing of premises on a temporary basis for the purposes specified but includes even other facilities supplied in relation thereto. The phrase in relation to is of the widest amplitude. It was held not to be a tax directly on the land. The Apex Court has laid down thus: - 41. With regard to the first aspect, it is submitted that in order to constitute a tax on land, it must be a tax directly on land and a tax on income from land cannot come within the purview of the said entry. This was affirmed by a seven-Judge Bench of this Court in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ), is a very broad expression which presupposes another subject-matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context. (SCC p.329, paras 48, 50). 51. Taxable services, therefore, could include the mere providing of premises on a temporary basis for organising any official, social or business functions, but would also include other facilities supplied in relation thereto. No distinction from restaurants, hotels, etc. which provide limited access to property for specific purpose. 14. It is clear that for supply of country liquor, the distillers transport the rectified spirit to the warehouses/bottling plants. The conversion of rectified spirit into plain/spiced country liquor is earned out under control and supervision of the Warehouse Officer. He examines, tests and approves under-proof of the country liquor as per the calibrations/norms fixed by the Government. During the process of converting the rectified spirit into potable spirit plain/spiced country, the said rectified spirit do not undergo any change. Only strength of the rectified spirit is reduced by adding water to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges were prescribed and there were service obligations to be carried out in the form of bottling while undertaking the packaging activity. There was obligation to reuse the bottle offered by the contractors. The entire mechanism leaves no room :or any doubt that it was packaging activity, which was clearly a service activity under Section 65(76)(b) not process of manufacture as defined in Section 2(f) of the Central Excise Act. 15. It may also be noted that Section 2(d) of the Central Excise Act de-fines excisable goods means goods specified in the First Schedule and the Second ond Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt. The Chapter 22 of the Central Excise Tariff Act, 1985 covers Beverages, Spirits and Vinegar. However, as per the Chapter Note (4) this Chapter does not cover alcoholic liquors for human consumption. Therefore, the activity of various distillers do not come under the purview of manufacture as defined in Section 2(f) of Central Excise Act, 1944. The bottled country liquor or its packing or re-packing activity has not been mentioned/specified in Central Excise Tariff Act. Even if we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down that whether a particular process is covered by manufacture as defined in Section 2(f) is a question of fact, to be determined in the facts of each case. In Collector of Central Excise, Hyderabad v. M/s. Jayant Oil Mills Pvt. Ltd. - 1989 (40) E.L.T. 287 (S.C.) - (1989) 3 SCC 343, the Apex Court held that all proceesses do not constitute manufacture, in our opinion, merely by providing service for bottling a new commodity, does not come into being new article, it is clearly a service provided. Manufacture is complete as soon as by the application of one or more process, the raw material undergoes some change. The moment there is transformation into a new commodity commercially known as a separate and distinct commodity having its own character and use, 'manufacture' takes place as held by the Apex Court in Aditya Mills Ltd. v. Union of India - (1988) 4 SCC 315. In Collector of Central Excise, Madras v. M/s. Kutty Flush Doors and Furniture Co. (P) Ltd. - 1988 (35) E.L.T. 6 (S.C.) = AIR 1988, it is held that by conversion of timber logs into sawn timber, no new product emerged by sawing of timber, therefore, higher excise duty on sawn timber was not leviable. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be passed on by the distillers/bottlers to the wholesalers/retail contractors. It is clear that service tax being an indirect tax, the element of service tax can be passed on to the service receiver so held by the Apex Court in T.N. Kalyana Mandapam Association v. Union of India and others (supra). 21. It has not been disputed by Shri H.S. Shrivastava, learned Sr. Counsel that once packaging activity is held to be outside purview of Section 2(f) of Central Excise Act than service provider can pass on the liability on the retail contractors and so on. The submission raised is right and is supported by the aforesaid decision of the Apex Court, though the service tax can be realised by the Central Excise only from the service provider. In the decision (P-11) rendered by the learned Single judge of this Court, the only question which was considedered, was that whether service tax could be realised by the Central Excise from the retail contractors, who were not service provider, in that context the decision was rendered. It was not the question agitated or decided whether liability could be passed on by the distillers (service provider) to the retail contractors, thus, in our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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