In a significant ruling, the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT)ruled that the process of manufacture consisting of blending, bottling, and packaging of Indian-made foreign liquor is not taxable under the head of Business Auxiliary Service.
Hi-Tech Bottling Private Limited, the assessee companies engaged in carrying out job work of blending, bottling, labelling and packaging of IMFL shall not be considered as business auxiliary service and taxed as such to service tax. The demand for the Service Tax including Education Cess was done by the revenue to the tune of Rs.95,14,725/- (Rupees Ninety-Five Lakhs Fourteen Thousand Seven Hundred Twenty Five only) under Section 73 (1) of the Finance Act, 1994. which got dropped at the adjudication stage.
The Revenue filed the appeal and contended that the adjudicating authority has erred in holding that the activity of blending, bottling, labelling etc. of Indian-Made Foreign Liquor (IMFL) by the assessee, amounted to manufacture as defined under Section 2(f) of the Central Excise Act, 1944 and dropped the entire demand.
Based on the agreement, the assessee did the work for the main manufacturer and had raised the bills of different charges/expenses such as bottling charges, manufacturing charges etc. incurred by them for the production of IMFL on behalf of clients were paid. The work was done under the instruction of the service receivers for the production of IMFL.
It was observed that the assessee has no control over the prices of IMFL products which use to be determined by the clients who are the actual owner of the IMFL products. A Coram of Shri Sanjiv Srivastava, member(technical) and Shri P Dinesha, member(judicial) viewed that if the Contract Bottling Unit (CBU) undertakes the complete process of manufacture of alcoholic beverage under the ‘contract bottling arrangement’, then such activity would not fall under the taxable service under the head of the Business Auxiliary Services.
The Tribunal found no reasons to interfere with the original order and while dismissing the appeal filed by Revenue, held that “the process of manufacture consisting of blending, bottling, and packaging of Indian-made foreign liquor is covered under Section 2(f) of the Central Excise Act, 1944, and is excluded from the purview of Business Auxiliary service under Section 65(19) of the Finance Act, 1994.”
Shri K Chowdhury, Authorized Representative appeared for the Appellant and none appeared for the respondent-assessee.
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