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TMI Blog2025 (1) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... While working out cost of any manufactured product costing is done by splitting cost elements into fixed cost and variable cost and that cannot change the nature of the activity. What could have changed the nature of the activity is a situation where no manufacturing activity took place and still the appellant collected their charges.'
There is no merit in the impugned order-in-appeal - Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... vice shall be determined in the following manner, namely " (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax. Explanation. For the purposes of sub-section (3), the expression "bundled service" means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.' 5.6.1 In view of the above provisions, the instant case on hand, does not involve any dispute in relation to the classification of the services. There are two elements involved in the loan licensee agreement, first, when the job work is undertaken, the same is against the job charges which are referred to as variable cost depending upon quantum of manufacture and clearance and second, fixed cost for the stack/lean period when no job work activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts for any third parties. 4 FORMULATION AND PACKING 4.1 Toller shall Formulate and/or pack the Products at the plant for Syngenta in accordance with the specifications on a non-exclusive basis and on the terms and conditions of this agreement. The term "non-exclusive" in this clause means: (a) Syngenta may engage other Tollers to carry out formulation and packing of the products; and (b) Toller shall not carry out formulation and packing of products for other parties other than Syngenta at the plant. (c) Toller shall not use any machinery, equipments or storage vessels to manufacture products at the plant for any other party other than Syngenta. 4.2 The Toller shall provide all facilities and staff required for such formulation and/or packing, and shall not outsource the formulation and/or packing to third parties. 6 SYNGENTA MATERIALS 6.1 Syngenta will supply Toller with the Syngenta materials free of charge, for use only in formulating and/or packing the products. Toller shall not use any materials in substitution for the Syngenta materials to formulate the products." It can be seen that the agreement is primarily for manufacturing of pesticides by re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erages, whereas in other months, the demand is lower. Keeping in view the constant availability of funds to meet the fixed charges and finance charges and for variable cost towards job charges, two tier billing has been provided, to the appellant job worker to meet the financial obligation round the year. Admittedly, appellant has paid the excise duty on the goods manufactured and cleared for the principal manufacturer, as is evident from the copy of excise returns filed before the Tribunal. In this view of the matter, we conclude that the job charges received by the appellant have formed part of the cost of manufacture, which have suffered excise duty. Accordingly, we hold that service tax cannot be levied on the fixed components of job charges. We also find that under similar facts and circumstances in the case of BOC India Limited v. Commissioner of Central Excise, Jaipur - 2018 (10) G.S.T.L. 309 (Tri. - Del.) it was observed that BOC was engaged in the manufacture and supply of gases and are liable to pay Central Excise duty. BOC put up the storage facility inside the client premises to store such gases for subsequent consumption. For such activity, they are collecting fixed fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. JLSL was also supervising the manufacturing process and was taking steps to ensure the quality of the products. All activities like handling the raw materials, its accounting and processing was done by appellant (earlier known as PMSL). This means that both the parties were involved in the manufacturing activity. It is also to be noted that such manufacturing arrangements are very common in the country. In such situation legal provisions exist in Central Excise laws for considering either of the two parties as manufacturer. In most cases the persons doing the job-work claims to be the manufacturer and pays excise duty as applicable in his hands. There are situations where the person supplying raw materials undertakes to pay excise duty and for that reason excise duty is not charged in the hands of the person doing the manufacturing activity. Notification 214/86-C.E. is applicable in such cases. 16. Section 2(f) of Central Excise Act defines manufacture and manufacturer as under : "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing activity. All the activities done by the appellants have to be seen together and when it is so seen it is clear that they were doing manufacturing activity. For reasons already explained, the fact that PLSL was paying excise duty does not lead to a legal position that the appellant (earlier known as PMSL) was not doing manufacturing activity. The fact that appellant (earlier known as PMSL) was charging two components towards job-charges separated as fixed cost and variable cost cannot alter this situation so long as goods were manufactured. In a situation where goods were not manufactured but charges were collected under the fixed component it could have been considered as a service. While working out cost of any manufactured product costing is done by splitting cost elements into fixed cost and variable cost and that cannot change the nature of the activity. What could have changed the nature of the activity is a situation where no manufacturing activity took place and still the appellant collected their charges." 7. In view of the above discussion, we hold that impugned order-in-original is legally sustainable and therefore, the appeal is dismissed. Cross objection also get ..... X X X X Extracts X X X X X X X X Extracts X X X X
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