By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Multi-piece packing of soaps on job work basis amounts to deemed manufacture and hence cannot be taxed under Business Auxiliary Services – Matter remitted back to pass a reasoned order and also to consider the effect of Exemption Notification qua intermediate production processes.
Facts:
The appellant undertook job work activities in the nature of mixing of soap bits provided by the supplier company and returning the same in 50 kg. or bigger bags as per company’s instruction and multi-piece packing for which they received consideration. The department contended and confirmed the demand considering the activities as business auxiliary service.
Held:
The Tribunal observed that as per section 2(f)(iii) of the CE Act, 1944 ‘manufacture’ includes any process which in relation to the goods specified in the 3rd Schedule involves packing or re-packing of such goods in a unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment to the goods to render the products marketable to the consumer and soaps were covered under Serial No. 40 of the said 3rd Schedule. Therefore, multi-piece packaging would fall under the category of “packing or re-packing of goods” and would be an activity of ‘manufacture’. The department’s contention that soap is already in packed condition and hence manufacture is said to be completed was not accepted by the Tribunal on the ground that, multi-piece packaging is done on the soaps already packed and therefore, it would amount to repacking and accordingly the activity would be covered under the definition of ‘manufacture’ u/s. 2(f)(iii). It was further held that if the soap noodles are sold as such after mixing and packing/re-packing, then the activity undertaken by the appellant would amount to ‘manufacture’. On the other hand, if they are not sold as such, but are subject to further processes, since the goods are moved under Rule 4(5)(a) of the CENVAT Credit Rules, 2004 it will be an intermediary process in the course of manufacture of soaps and since such movements are permitted without payment of excise duty, the question of levy of service tax would not arise at all in terms of Notification No.8/2005-ST dated 01/03/2005. However, since there was no finding in the order except that the appellant did not contest the duty, the matter was remitted back to give specific finding as to why the activity of the appellant did not amount to manufacture and if it does not amount to manufacture, why benefit of Notification No. 8/2005-S.T. cannot be extended.
