The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) held that the activity of packaging bulk goods into retail packs constitutes “manufacture” under the Central Excise Act, 1944.
The appellant, M/s Emami Limited, is engaged in the manufacturing and clearance of ayurvedic and cosmetic items as finished goods falling under Chapters 30 and 33 of the Central Excise Tariff Act, 1985. The contracts with the job workers were specific to converting bulk products into retail packs, a process deemed “manufacture” under Chapters notes 5 and 6 of Chapters 30 and 33 of the Central Excise Tariff Act, 1985. This classification aligns with Section 2(f) of the Central Excise Act, exempting the activity from service tax as it falls within the “negative list” under Section 66D(f) of the Finance Act, 1994.
The case arose from a demand of Rs. 4.25 crore in service tax from Emami Limited, along with penalties imposed on the company and its contractors, Chandan Kakati, Pradip Das, and Vaishno Devi Enterprise.
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It was submitted by the revenue that the contractors provided manpower supply services disguised as job-work contracts, evading service tax liabilities under the Finance Act,1994. These demands were based on statements recorded during investigations, wage calculation sheets, and contractors’ registrations/licenses.
The appellant’s counsel contended that the conclusions drawn in the impugned order are based on a misappreciation of the evidence and contrary to the facts on record.
The CESTAT observed several procedural lapses and substantive issues and noted that statements from contractors, used as key evidence, were retracted and never validated under Section 9D of the Central Excise Act, making them inadmissible.
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The bench also observed that the agreements detailed the nature of the work, delivery schedules, quality standards, and compensation for damages—all hallmarks of job-work contracts rather than manpower supply arrangements. Further, it emphasised that the supervision and control of labourers lay with the contractors, as evidenced by wage records and contractual terms.
The CESTAT, comprising Ashok Jindal ( Judicial Member ) and K. Anpazhakan ( Technical Member ) set aside the service tax demands and the penalties made and held that the activity of packing its bulk into retail packs amounts to manufacture, due to which no service tax is payable by the other appellants or the job workers.
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