The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax not payable on packaging activity as it is covered under the category of ‘manufacturing’.
Deepak & Co, the appellant/assessee had been rendering the taxable service in the nature of ‘business auxiliary service’, but had not paid Service Tax on the same. It was found that the main job of the contractor was segregating the metal and slag, sizing and packaging as per the requirement of the service receiver, to make the product saleable and marketable.
Know How to Investigate Books of Accounts and Other Documents, Click Here
The department stated that the appellant was involved in the production / processing of the goods on behalf of their clients and hence, fall within the definition of Part (v) of the definition of “business auxiliary service’.
A Show Cause Notice was issued to the appellant inter alia demanding Service Tax under the category of “business auxiliary service”. The Notice was adjudicated by the Commissioner of Central Excise and Service Tax, Durgapur Commissionerate in which the Commissioner has confirmed the demand of Service Tax raised in the Notice, along with interest. He also imposed an equal amount of tax as penalty under Section 78 of the Finance Act, 1994 and penalties of Rs.10,000/- each under Section 77(1)(a) and 77(2).
The appellant contended that they have undertaken the work of segregating the metal and slag, sizing and packaging, as per the requirement of their clients. The activity undertaken by them makes the goods saleable and marketable. The activity undertaken by them falls within the ambit of Section 2(f) of the Central Excise Act, 1944 and hence, the same amounts to ‘manufacture’. Since their activity amounts to manufacture, no Service Tax is payable on the said activity.
Know How to Investigate Books of Accounts and Other Documents, Click Here
The two member bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the packaging activity undertaken by the appellant falls squarely within the ambit of the definition of ‘manufacture’ as defined under Section 2(f) of the Central Excise Act. Once the activity is held as amounting to ‘manufacture’, it is excluded from the purview of Service Tax as per the definition of ‘business auxiliary service’.
The tribunal held that the appellant has been undertaking the activity of segregation of metal and slag, sizing and packaging, as per the requirement of their customers. It was observed that the activity of sizing and packaging is an essential process, which makes the final product is marketable.
Since the demand of Service Tax under the category of ‘business auxiliary service’ is not sustainable, the bench held that the question of demanding interest and imposing penalties does not arise.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
