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TMI BlogLevy of service tax on production of alcoholic beverages on job work basis -regX X X X Extracts X X X X X X X X Extracts X X X X ..... s of dispute for a considerable period. In this regard, a draft circular F.No.249/1/2006-CX.9, dated November, 2006 (on applicability of service tax on taxable services provided in certain cases during the course of production of alcoholic beverages) was placed on the official website for eliciting responses from the stakeholders. The responses received from various stakeholders were carefully examined. It was noticed that in certain cases such alcoholic beverages are produced by the distillers who also own the brand names affixed on such beverages. Such beverages are cleared on payment of State Excise Duty and there are no known disputes as regards the liability to pay service tax. In other cases, the owners of the brand name and the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the required State Licences for manufacture of the alcoholic beverages. In trade, such licencees / manufacturers are called the Contract Bottling Units or CBUs. The cost of raw materials (and in some cases, even capital goods) and other expenses are either paid by the BO or reimbursed by the BO. Statutory levies (i.e. State excise Duty) are also reimbursed to the CBU by the BO. The alcoholic beverages are sold by or as per the directions of the BO and profit or loss on account of manufacturing and sale of alcoholic beverages is entirely on account of BO, who thus holds the property, risk and reward of the products. The CBU receives consideration (i.e. job charges) for undertaking the manufacturing activity on job work basis. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to manufacture as defined under section 2(f); and The result of such process should be emergence of excisable goods, which as per section 2(d) are the goods specified in the First and the Second schedule of the Central Excise Tariff Act, 1985 as being subjected to duty of excise. Therefore, 'manufacture' and 'excisable goods' are two independent concepts and that it is not necessary that a process amounting to manufacture within the meaning of section 2(f) should always result in emergence of an excisable goods and vica versa. Whether a process would amount to manufacture within the meaning of section 2(f) has to be seen independently, based on the criteria evolved through various judgements of the apex court. There may be a case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having different scope, the same would get disturbed / distorted if the context and scope of the earlier Act is also imported. Thus just because Central Excise Act does not extend to the manufacture or production of alcoholic beverages meant for human consumption, it cannot be said that the term 'manufacture' used in Business Auxiliary Service would also not cover the process of making the said product, namely alcoholic beverages. 3.3 In view of the foregoing, it was decided that if the CBU undertakes complete process of manufacture of alcoholic beverage under the 'contract bottling arrangement' as described above then such activity would not fall under the taxable service, namely the BAS. However, in case the activity undertaken by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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