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Packaging activity on manufacture of non-excisable goods falls within the ambit of Central Excise Act — Not liable to Service tax.
Facts:
The appellants were engaged in activity of bottling, labelling, affixing the hologram sticker and sealing of glass bottles of country liquor manufactured by them. They contended that the packaging activity undertaken by them amounts to manufacture and does not attract Service Tax. Furthermore, the definition of packaging activity as per the Finance Act, specifically excludes packaging activity amounting to manufacture as per the Central Excise Act.
The respondents stated that liquor manufactured by the appellants was not excisable goods as liquor was not mentioned in the Central Excise Tariff Act. This implies that activity was not covered by definition of manufacture as per the Central Excise Act and the activity was covered under ‘Packaging activity services’ under the Finance Act. Additionally, they relied on MP High Court’s judgment in the case of Vindhyachal Distilleries Pvt. Ltd. v. State of MP, 2006 (3) STR 723 (MP) in which it was held that bottlers are required to pay Service tax.
Held:
The decision which was relied upon by the respondents was overruled by the larger Bench judgment of the MP High Court in which it was held that packaging and bottling of liquor is covered by definition of manufacture. Accordingly, no Service tax was chargeable. Thus appeal was allowed in favour of the appellants.
