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TMI Blog2024 (12) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... , the activity of packing of its bulk into retail pack, amounts to manufacture. Therefore, no service tax is payable by the other appellants or the job workers. In this case, the case has been made out against the appellant on the basis of the statement recorded during the investigation - on the basis of statement recorded during the course of investigation without testifying the same under Section 9D of the Act, the service tax cannot be demanded from the appellant. Another reason for demanding service tax from the appellant is that the wages calculation shows the amount reflected in the profit and loss account by Shri Chandan Kakati, Contractor - HELD THAT:- The classification of the activity is to be decided in accordance with the law laid down by the Parliament not by the manner in which the assessee is maintaining its accounts. In that circumstances, the nomenclature given by the contractor does not have any binding effective clause of the activity undertaken by them. Admittedly, the activity of packing of its bulk pack into retain pack, the said activity amounts to manufacture in terms of Section 2 (f) of the Central Excise Act, 1944. Therefore, on this ground, the service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Contractor No.2) and M/s Vaishno Devi Enterprise (Contractor No.3) are also in appeals against imposition of penalties only to the tune of Rs.10,000/- each under Section 77 (1) of the Finance Act, 1994. 2. The facts of the case are that M/s Emami Limited is engaged inter-alia in the manufacture and clearance of ayurvedic and cosmetic items as finished goods falling under Chapter 30 and 33 of the Central Excise Tariff Act, 1985 from its manufacturing facility located in EPIP Complex, Amingaon, Assam. The Appellant operated under the erstwhile Cenvat Credit Scheme and had been discharging its excise duty liability on the finished good cleared from its factory premises in retail packs, in accordance with Section 4A of the Central Excise Act, 1944. It may be noted, that by virtue of Chapter note 6 and 5 of Chapter 30 and Chapter 33 respectively as also in terms of the definition of manufacture as contained in Section 2(f) of the Act, the activity of packaging of finished goods from bulk to retail packs amounts to manufacture . 2.1 During the relevant period, the Appellant had awarded Job contracts/work orders to interalia the following contractors for carrying out the activity of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plan was shared with the contractors at the beginning of every month. The bulk finished goods along with the packing material was made available to the contractors for the conversion of the same into retail packs. Thereafter, finished goods packed throughout the day was duly verified by the Appellant and was entered in the packing register which was counter-signed by both the parties i.e., the Appellant and the contractors. At the end of each month, job work invoices were raised by the Contractors based on the quantity packed at the pre-agreed rates and were submitted with the Appellant along with the Annexure containing details of item-wise packing activities undertaken during the month. Any wastage was deducted from the value of the invoice and payment was made to the contractors after making the statutory deductions. No service tax was discharged by the contractors and/or the Appellant on these contracts. 2.3 Acting upon intelligence, proceedings were initiated vide search conducted at the premises of Contractor No.1, with the aim of establishing that the manpower supply services were mis-declared as job-work contract. Statements of all 3 contractors and the Appellant was recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equally applicable to service tax demands in view of Section 83 of the Finance Act, 1994. However, in the instant case the prescribed procedure has not been followed and as such the statements of the contractors have no evidentiary value. Reliance in this regard is being placed on the judgement of the Hon ble CESTAT, Kolkata in the case of Ms. Narsingh Ispat Limited Vs. Commissioner of CGST and Central Excise [2024 (3) TMI 1037] as also in the case of Ms. Prinik Steels (P) Ltd. Vs. Commissioner of C. Ex., Cus., ST [2023 (12) TMI 299]. 1.2. There has been pick and choose of statements in order to suit the case of the Revenue, which is not permitted by mixing two different contracting periods of Contractor No.2 1.3. The statements of Contractor No. 1 are full of contradictions and inconsistencies and as such the same cannot be relied upon [Refer Commissioner of C. Ex., Gurgaon Vs. Reliant Packing Films 2009 (248) E.L.T. 169 (PH)]. 1.4. Contractor No. 1 and Contractor No.3 were coerced to give statements on dotted lines which were subsequently retracted. It is a settled principle in law that retracted statements have no evidentiary value [Refer - Amrik Singh Saluja Vs. Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the basis, then demand with respect to Contractor No. 1 (Description in the license Packing, Unloading and Material Transportation) and Contractor No.2 (Description in the license Manufacturing of Cosmetic Production ) cannot be proceeded with on this limited ground alone 3.1 He further submitted that the conclusions drawn in the impugned order, are based on a mis-appreciation of the evidence and contrary to the facts on record as elaborated herein above and the observation made in the impugned order to purportedly conclude that the appellant was involved in receiving manpower supply services are clearly unsustainable. 3.2 It is his further submission that the observations of the Ld. Adjudicating Authority in the impugned order have been made without proper appreciation of the facts and evidence. The observations of the Ld. Adjudicating Authority along with the rebuttals of the Appellant have been summarised in the table hereunder: Sl. No. Observations of the Ld. Adjudicating Authority Rebuttals of the Appellant 1 That the control of the amount of requirement of manpower was vested with the Appellant and the same was requisitioned by the appellant to the Contractor; 1.1 No r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by M/s. Emami Ltd. or otherwise had clearly stated that We were involved in packing and converting the bulk quantity into smaller packs . 3 That the onus of damage/loss of raw material or finished goods was on the Appellant and not the contractors; 3.1 Damages and loss of packing material/finished goods beyond the mutually agreed limits was to the account of the Contractors as evidence from clause 6 12 of the work orders/job contracts. Contractor No.2 has categorically deposed in the affirmative in his Statement dated 23 September 2019 in response to Q. No. 13 14. Further, the invoices showing recovery of damage/high wastage from Contractor No. 1 has also been enclosed as Exhibit N. 4. That neither the Appellant nor the contractors maintained any packaging register; 4.1 Clause 3 of the work order/job agreement required maintenance of a packaging register. The Statement of Contractor No.2 itself acknowledges that the packaging register was maintained by Appellant. There was no specific requirement that the packaging register has to be maintained by the Contractors. Copies of the daily production report duly signed by both the parties have also been referred as Exhibit C. 5. Althoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negative list of services in terms of Section 66D(f) of the Finance Act, 1994. Reliance in this regard is being placed on the following judgements of the Tribunal: (i) Commissioner of Service Tax II, Kolkata Vs. Anmol Biscuits Limited 2022 (62) G.S.T.L. 171 (Tri. Kolkata) (ii) Ms. Suresh Contracts Vs. Commissioner of Central Excise ST, Salem 2023 (5) TMI 393 (Tri. Chennai). (iii) Ms.Fire Controls Vs. Commissioner of Central Excise, Customs and Service Tax, Mysore - 2019 (8) TMI 1028 (Tri. Bang.) (iv) Divya Enterprises Vs. Commissioner of Central Excise, Mangalore 2010 (19) S.T.R. 370 (Tri. Bang.) (v) Shivshakti Enterprises Vs. Commissioner of Central Excise, Pune 2016 (41) S.T.R. 648 (Tri. Mumbai) 3.6 He further contended that it would be pertinent to note that with respect to another contractor, M/s. Lucky Enterprise, engaged by the appellant for the same activity, with similar terms of agreement during the overlapping period 2014-15, the service tax demand was raised upon the said contractor based on the differences in the ST 3 returns vis- -vis the Income Tax returns. However, the said proceedings were subsequently dropped vide Order-In-Original dated 19 January 2022 by classify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per piece basis for the quantity of finished goods packed during the respective months as evident from the tax invoice and packing register, countersigned by both the parties. 5 Service provider is liable to compensate the service recipient if the work is not as per the standard norm Any loss or damage arising during production/packing activity above the mutually agreed limited was borne by the contractors in terms of the agreement. The value of the loss/damage was deducted from the invoices raised by the contractors. The same has also been admitted by Contractor No. 2 in his statements. 6 In case the work is executed by the service provider at the cite of the service recipient, the service provider would indemnify the service receiver of any loss to inputs and infrastructure The contractors were responsible for any damage caused to any property belonging to the Appellant. (Refer Clause 12) 7 The personnel deployed for the assigned job would be under the control/supervision of the service provider The supervisors of the contractors were responsible for the supervision of the labourers. Same is evident from the wage calculation sheet and the profit and loss account of the contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. CST, New Delhi 2022 (67) GSTL 129 (SC). 3.13 He further submitted that the contractors were not required to obtain service tax registration under Section 69 of the Finance Act, 1994 as the activity undertaken by them amounted to manufacture and as such penalty cannot be imposed on them. 3.14 In terms of the above, it is evident that the activity undertaken by the contractors amounted to manufacture and the same was covered under the negative list of services. Therefore, service tax was not leviable on the said activity. When there is no service tax liability, the question of service tax registration does not arise. In this regard, attention is drawn towards the relevant portion of Section 69 of the Finance Act, 1994, which provides for the persons who are required to be registered under Service Tax. Section 69 states as follows: 69. (1) Every person liable to pay the service tax under this Chapter or the rules made thereunder shall, within such time and in such manner and in such form, as maybe prescribed, make an application for registration to the [superintendent of Central Excise. 3.15 A bare perusal of the above quoted provision makes it abundantly clear that a person is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant or the job workers are liable to pay service tax on the activity of packing of its bulk pack into retail pack or not ? 7. Admittedly, the item which is manufactured falling under Chapter 30 and 33 of the Central Excise Tariff Act, 1985. The Chapter Note 6 5 of Chapter 30 and 33 respectively defines the manufacture as contained in Section 2 (f) of the Act that the activity of packaging of finished goods from bulk to retail packs amounts to manufacture . Therefore, the activity of packing of its bulk into retail pack, amounts to manufacture. Therefore, no service tax is payable by the other appellants or the job workers. In this case, the case has been made out against the appellant on the basis of the statement recorded during the investigation. As such, the statement was later on retracted and this statement was never tested in terms of Section 9D of the Central Excise Act, 1944. Therefore, this statement cannot be a legal evidence and have no evidentiary value in the eyes of law. Therefore, on the basis of statement recorded during the course of investigation without testifying the same under Section 9D of the Act, the service tax cannot be demanded from the appellant. ..... 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