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TMI Blog2009 (6) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... Loan Licence Basis; that the department issued five SCNs covering the period from 10-9-2004 to 9/2008 on the ground that the activity of production or processing of goods for or on behalf of a client (the raw material supplier) is covered under the statutory definition of Business Auxiliary Service (BAS in short) with effect from 10-9-2004; that it was further alleged in the SCNs that the meaning of manufacture as defined under clause (f) of Section 2 of Central Excise Act, 1944 is applicable only to the word manufacture appeared in the Central Excise Act and the said products manufactured by the appellant on behalf of the raw material supplier were not covered under the First Schedule to the Central Excise Tariff Act, since the said products were not excisable goods and accordingly, the appellant is liable to pay service tax for the above said period; that it was further alleged that the appellant had fully produced the said goods and were ready for sale to the customers in the market and the said goods were not used by the raw material supplier in or in relation to manufacture of any other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 78 of the Act. 2. Being aggrieved by the above orders, the appellant has come up with the present two appeals along with stay petitions. The contentions of the appellant are summarized as under :- (i) that the question of excisability of the product will have to be decided only if the said product is the result of activity of manufacture under Section 2(f) of the Central Excise Act, 1944 and hence merely because the product coming into existence is not excisable, one cannot refuse to accept the activities which has given birth to the said product; (ii) that there are catena of decisions where under in spite of product marketable and even covered under the Central Excise Tariff, the same is held as non-excisable being not manufactured product which proves beyond any doubt that any activity which brings into existence a new product is manufacturing activity falling within the definition of Section 2(f) and hence, the activity of the appellant which brings in a new product out of raw materials supplied from his client amounts to manufacture as defined under Section 2(f) and hence is excluded from the definition of BAS; (iii) that the activities carried out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 at 12.00 Noon. Shri V. B. Gaikawad, Advocate, duly authorized by the appellant appeared before me at 12.00 Noon in respect of both the appeals. None appeared from department s side despite intimation. 3.1 During the hearing, in addition to reiterating the submissions made in the appeal memorandums, he has stressed the following - (a) that in respect of appeal No. 288/2008 there is an inordinate delay of more than 16 months from the date of knowledge of the department and hence it is hit by limitation; (b) On merit, he relies on the Board s Circular No. 249/1/2006-CX.4 dated 27-10-2008, according to which when the activity amounts to manufacture but the commodity is non-excisable, the activity is not liable to be brought under Business Auxiliary Service for charging service tax; (c) that as the issue involved is of interpretation, there arises no question of imposition of penalty, since no mala fide intention can be attributed; (d) that if it is held that his client is liable to pay service tax under Business Auxiliary Service , he will be put into undue hardships since he has to bear the burden of the service tax without getting the credit on the inputs supplied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. 4.2 In view of the above contradictory stands, it has to be seen that whether the activities undertaken by the appellant would amount to manufacture ; that whether the definition of manufacture used in the Central Excise Law and Notification (i.e. 8/2005) issued under Central Excise Law would also cover the definition given under the Medicinal and Toilet Preparations Act, 1955. To come to a proper conclusion, it is imperative on my part to see the definition of BAS , the definition of manufacture given under Section 2(f) of the Central Excise Act, 1944, the meaning of excisable goods given in Central Excise Act and the Explanation given for the word manufacture in the Notification No. 8/2005. (A) Definition of BAS under Section 65(19) as available from 10-9-2004 with reference to production or process of goods for or on behalf of the client the definition reads as under - 65 (19) business auxiliary service means any service in relation to - (i) (ii) ........... (iii) (iv) ........... (v) production of goods on behalf of a client (upto 15-6-2005)/production or processing of goods for, or on behalf of, the client (with effect f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When it is excisable? It is excisable, when it is found mentioned in the Central Excise Tariff Act. In the instant case, though during the process, a new product comes into existence and is suffering duty under MTP Act, 1955, as claimed by the appellant, the manufacturing activity is not the same with that of the definition given in Section 2(f) of Central Excise Act, 1944. Besides, other conditions i.e. the goods should be excisable (for being excisable, the same should find a place in Central Excise Tariff Act, 1985) and come back to the original raw material supplier for further use and subsequent clearance on payment of Central Excise duty, are missing. Thus, the manufacturing activity of the appellant is different from the one envisaged in Section 2(f) of Central Excise Act, read with Notification No. 8/05 issued under Finance Act, 1994. Accordingly, the benefit of the above Notification is not available to the appellant. Further, the intention of the legislature is very clear that when the-goods manufactured, which are excisable and which are specified under the schedule 1 or schedule 2 of the Tariff Act, 1985, excise duty is payable. When activities do not amount to manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, no doubt, the appellant has undertaken the job work on the raw materials supplied by his client (M/s. Pfizer Limited, Mumbai) but other ingredients such as sending back the goods to his client, the nature of goods (excisable goods mentioned in the Central Excise Tariff) and clearances on payment of excise duty are missing. Therefore, the activity of the appellant is completely excluded from the purview of the said notification. In short, the activity of the appellant would clearly fall under BAS . In this regard, the decision of the Hon ble Tribunal Mumbai, under whose jurisdiction the present appellant is falling, in the case of M/s. Midas Care Pharmaceuticals v. CCE, Aurangabad - 2008 (12) S.T.R. 500 (Tri.-Mumbai) also squarely covers the issue on hand. Under para 7 of the above decision, it has been held that it is apparent that the applicants are producing goods for the client and are thus prima facie covered under BAS. The activity of production of goods in question does not amount to manufacture in the Central Excise Act, 1944 and these are covered under MTP Act, 1955. What is excluded from the definition of BAS is manufacture within the meaning of Central Excise A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 11A of the Act . 5.1 Coming to the instant case, it can be stated that there is no such confusion with regard to the taxability on BAS. The Notification No. 8/2005 is very clear that the exemption is available only to the goods which amounts to manufacture in terms of sub-section (f) of Section 2 of Central Excise Act, 1944. By reading so, there will not be any ambiguity. In other words, if the intention of the legislature is to extend the exemption for every manufactured item , they would not have referred the manufacture in terms of sub-section (f) of Section 2 of the Central Excise Act, 1944. In the scheme of Central Excise Act, the manufacture has relationship with the excisable goods (excisable goods means goods which are mentioned in the Central Excise Tariff), and the notification gives exemption when excisable goods are consequently cleared on payment of excise duty. But in the instant case, the manufacture of the said goods cannot be related to the definition of manufacture given in terms of sub-section (f) of Section 2 of the Central Excise Act, 1944; that secondly, the said goods are not excisable goods, since the same were not found mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od is available. In other words, to cover the extended period, the SCN has to be issued within the normal period of 6 months. In the instant cases also, it has come on record that the Central Excise officers acquired the knowledge of the appellant s activities in view of the specific letter of the appellant dated 3-2-2006. But the SCN was issued on 6-7-2007. Hence in view of the Apex Court s judgment which is a law of the land under Article 141 of the Constitution, the above SCN-cum-Demand Notice is fully time-barred, since the SCN has been issued after the expiry of normal period of one year as envisaged in Section 11A of the Central Excise Act, 1944. Accordingly, the demand dated 6-7-2007 covering the period from 10-9-2004 to 31-7-2006 is not sustainable on account of time-bar. However, other four SCNs which were issued in time survive. Therefore, the demand of Rs. 13,59,792/- is upheld with interest and equal penalty. 6. With regard to other contention of the appellant during P.H. that if the appellant is liable to pay service tax under BAS, he will be put into undue hardship, since he has to bear the burden of service tax without getting the credit on inputs, it may be stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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