9911796707
TMI Blog2022 (8) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ousand Seven Hundred Twenty Five only) should not be recovered from them under Section 73 (1) of the Finance Act, 1994. 2. Interest at the appropriate rate should not be recovered from them under Section 75 of the Finance Act, 1994. 3. Penalty should not be imposed under sections 76, 77 & 78 of the Finance Act, 1994 for contraventions of the provisions of the Finance Act, 1994 and non-observance of the prescribed formalities. The show cause notice has been dropped as per the impugned order. Hence the Revenue is in appeal before us. 3. The matter has been listed for hearing on 28.08.2019, 05.11.2019, 14.01.2020, 18.01.2022 and on today. On most of the occasions, respondent was not present for hearing as in the case today. Accordingly, in terms of Rule 21 of CESTAT Procedure Rules, this Appeal is taken up for disposal after hearing the Appellant Revenue. 4. The entire case, as stated by Revenue in their Grounds of Appeal is follows:- 2.1 In response to the Show Cause Notice, the notice initially stated that the figures as mentioned in the Show Cause Notice were wrong and requested for further time to submit the documents. On 08.02.2008, they submitted that the process of man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Indian Made Foreign Liquor (hereinafter referred to as 'IMFL') by the notice, amounted to manufacture as defined under Section 2(f) of the Central Excise Act, 1944 and consequently dropping the entire demand, on the following grounds. 3.1: As per Section 65(19) of the Finance Act, 1994, to quote "business auxiliary service" means any service in relation to, - .............. (v) production or processing of goods for, or on behalf of, the client; ................but does not include ........................... Any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Central Excise Act, 1994, to unquote. In other words, if the activity of production or processing of goods for, or on behalf of the client, does not amount to manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944, then such activity is eligible to Service Tax under the category of 'Business Auxiliary Service'. 3.2: At para 8 of the Order-in-Original, the Commissioner has erred in observing that to quote "it is apparent on the face of the records that all the processes required for production of IMFL are being carried out by the notice" to unquote, to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcoholic beverages (such as Indian Made Foreign Liquors, Branded Country liquors and similar products) are matters of dispute for a considerable period. In this regard, a draft Circular F.No. 249/1/2006-CX.9, dated November, 2006 [2006 (4) S.T.R. C7] (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 manufacturers may be two different entities and issues have been raised regarding provision of taxable services in such situations. There are several types of arrangements between the brand owners and the maker of the alcoholic beverages, which are as follows. 2. The Brand Licensing Arrangement 2.1 Many alcoholic b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning of clause (f) of Section 2 of the Central Excise Act, 1944 from its ambit. The issue in dispute is whether such activity would be hit by the exclusion clause mentioned above. 3.2 In the draft circular dated November, 2006, it was mentioned that as alcoholic beverages are not covered under central excise law, the production of beverages would not fall within the meaning of manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act. Thus, the exclusion clause would not apply to production of non-excisable goods, resulting in its coverage under Business Auxiliary Service (BAS). However, the matter was reexamined in detail by the Board after receipt of the responses and it has now been concluded that the exclusion would be applicable in the instant case for the following reasons : (a) Plain reading of Section 3 of the Central Excise Act, 1944 shows that for levy and collection of central excise duty, the following conditions must be satisfied; * The process undertaken must amount 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 speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness 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 the CBU falls short of the definition of manufacture (such as activity of 'packing' or 'labelling' alone) then such activity would fall within its ambit and would be charged to service tax. 4. Lease Arrangement 4.1 Under such agreement the distillery of the lessor is taken on lease by the lessee (who has the licence to produce alcoholic beverages and may be the brand owner) who pays rent for the same. In such a case the rent collected by the lessor/distillery owner is chargeable to service tax under 'renting of immovable property service'. 5. Conclusion 5.1 The view expressed in draft Circular F.No. 249/1/2006-CX.9, dated November, 2006 stands modified as above. As there can be different types of arrangements between the contracting parties, the field office ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
