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TMI BlogSERVICE TAX ON PACKAGING SERVICESX X X X Extracts X X X X X X X X Extracts X X X X ..... SERVICE TAX ON PACKAGING SERVICES - By: - Dr. Sanjiv Agarwal - Service Tax - Dated:- 22-9-2010 - - Service tax has been imposed on packaging services rendered to any person by any other person engaged in provision of such services by the Finance Act, 2005 with effect from 16th June, 2005 vide Notification No. 15/2005-ST, dated 7-6-2005 . The gross amount charged to any person in relation to packaging services or activities shall be chargeable to service tax. Meaning of Packaging Activity Section 65(76)(b) defines packaging activity as under - "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 ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture' within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944) . Packaging activity must involve packaging of goods. The goods shall have the meaning as assigned to it in Sale of Goods Act, 1930 . Packaging of goods can be in any form and type and all types of goods are covered including edibles, gifts, general goods, industrial goods etc. Goods would imply movable goods only. Packaging of goods will include- (a) pouch filling (b) bottling (c) labelling (d) imprinting of the package. The aforesaid definition of packaging activity is an inclusive definition and not exhaustive. Packaging of goods covers all types of packaging and packaging of all types of goods. Essential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingredients of packaging activity According to the definition, packaging activity should satisfy that - (a) it involves packaging of goods; (b) goods packed must be movable goods only; (c) packaging could include any form and type, especially pouch filling, bottling, labelling and imprinting of packages; (d) packaging should not result in being called 'manufacture'. Any activity within the scope of manufacture is not packaging. Packaging activity, however, will not include such packaging which tantamount to 'manufacture' as defined under Section 2(f) of the Central Excise Act, 1944 , it may be noted that any process of packaging undertaken in relation to any item mentioned in III Schedule of Central Excise Tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1985 is considered as a manufacturing process. The process of packaging should not result in being called a manufacturing process. It should be ascertained whether the job work relating to packaging services amounts to the manufacture in term of chapter note or section note of Schedule I to the Central Excise Tariff Act, 1985 . In respect of goods mentioned in III Schedule , manufacture will include packaging or repackaging in unit container, labelling or re-labelling of containers, alternation of retail rate price or adoption of any treatment that renders the goods marketable. Manufacture Manufacture has been defined under section 2(f) of Central Excise Act, 1944 . According to section 2(f) of the Central Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1944 , "Manufacture" includes any process - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture; or (iii) which, in relation to the goods specified in the Third Schedule , involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. and the word "manufacturer" shall be construed accordingly and shall include not only a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account. Goods The following meanings have been attributed to the term 'goods' in the various judgements of the Supreme Court: - An article can be called "goods" if it is known to the market as such and can ordinarily come to the market for being bought and sold. - Actual sale of the article is not important, but it should be capable of being bought and sold. The term 'goods' cannot include immovable property. This definition must be satisfied. Thus, the goods mean any movable article, which can be bought and sold. The goods include all types of articles, comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odities bought and sold by merchants and traders. It includes machineries, food grains, furniture, etc. Taxable Service Section 65(105)(zzzf) defines taxable service as under - "Any service provided or to be provided to any person, by any other person, in relation to packaging activity". Packaging activity to be a taxable service should satisfy the following tests- (a) It should involve packaging of goods (b) Packaging may include pouch filling, bottling, labelling and imprinting of package. (c) Packaging service is rendered by any person being service provider to another person (d) Packaging activity is not a manufacturing activity. (e) Taxable service would include services provided and services to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided. Packaging done for self goods is not a taxable service. The service should be rendered to other person. Any service in relation to packaging which falls under the definition of manufacturing will not be a taxable service. Whether bottling, labelling and sealing of country liquor a packaging activity or manufacturing activity? In Vindhyachal Distilleries Pvt. Ltd. v. State of Madhya Pradesh [2010 -TMI - 77532 - HIGH COURT OF MADHYA PRADESH ] though the event was a manufacture in its technical sense but since the item being manufactured was country made liquor which falls under the State subject and is subject to levy of State excise, it was held not to be covered under the scope of manufacture as defined in section 2(f) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Act, 1944 . The Central Excise Act, 1944 would not cover the product being manufactured i.e., country liquor. The High Court held that the activities of packaging, bottling, labelling and sealing of bottles by pilfer proof caps of glass bottle of volume provided by bottlers was an independent activity and not a part of any process of manufacture of liquor as defined under section 2(f) . In Great Galleon Ltd. v. CCE C, Indore (2008) 9 STR 192 (CESTAT, Delhi), it was held that activity of bottling, labelling and sealing of country liquor in M.P. are covered under packaging services (Also see Vidhyachal Distilleries Pvt. Ltd. v. State of M.P. case) In Pneumatic Power Tools Co. v. CCE, Raipur (2008) 10 STR 294, (200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8) 13 STJ 20 (CESTAT, New Delhi), where contracts showed packaging of products, strapping bundles by steel strap, opening and spreading pieces for inspection and unitization of product bundles by metal straps, it was held that such a contract was not for cargo handling but packaging services. In Maa Sharda Wine Traders v. Union of India [2009-TMI - 34140 - MADHYA PRADESH HIGH COURT] , it was held that packaging and bottling of liquor comes within the ambit and sweep of manufacture under section 2(f) of Central Excise Act, 1994 and therefore, it is not exigible to service tax is view of exclusionary facet of the definition of packaging activity under section 65(76b) . A definition is not to be read in isolation and has to be read in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of phrase which it defines. In Som Distilleries Pvt. Ltd. v. Union of India [2009 -TMI - 33817 - MADHYA PRADESH HIGH COURT] , court overruled the Vindhyanachal Distilleries (supra) decision and held that packaging and bottling of liquor falls within the ambit of manufacture and does not attract service tax under section 65(76b) and upheld the Circular dated 27th October, 2008. In Great Galleon Ltd. v CCE, Indore (2009) 16 STR 169 (Cestat, Delhi), it was held that bottling and packaging of liquor amounts to manufacture and is not liable to service tax (Also see CCE, Indore v. Agarwal Distillers Pvt. Ltd. [2009 -TMI - 33828 - CESTAT NEW DELHI] . Packaging Services To GTA's Vide Notification No 1/2009 dated 5.1.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 , taxable services of packaging provided by any person to a goods to transport agency for use by such GTA to provide any GTA service in relation to transport of goods by road are exempt from levy of whole of service tax subject to condition that the invoice issued by such service provider should mention name and address of GTA and also number and date of consignment note. Packaging activities not to be a subject matter of service tax Following services will not be subjected to service tax: (a) packaging done for self use or consumption; (b) services done by in-house department; (c) packaging resulting in manufacture; (d) services without any consideration; (e) packaging done by retailer while selling goods; (f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packaging done for gift wrapping etc. Value of Taxable Service The cost of material or goods sold if any, to service users will not form part of value of taxable service. Freight, if any, will not be part of this service but shall be chargeable under goods transport agency services. There is no specific exemption to packaging done for fruits, vegetable or agricultural produce and all packaging services shall be valued as per section 67 . Person Liable Any person (including individuals) providing packaging services to any other person shall be liable to pay service tax and shall be treated as an assessee for service - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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