Custom, Excise & Service Tax Tribunal
Rubicon Formulations Pvt Ltd vs Commissioner Of Customs, Central ... on 19 November, 2009
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI Application No ST/MA(EH) 2355/08 and Appeal No. ST/75/08 Mum (Arising out Order-in-Original No. 28-29/ST/COMMR/2007 dated 28.11.2207 passed by the Commissioner of Customs, Central Excise & Service Tax, Aurangabad.) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) Honble Mr. B.S.V. Murthy, Member (Technical) ====================================================
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Seen
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Rubicon Formulations Pvt Ltd
Appellant
Vs.
Commissioner of Customs, Central Excise & Service Tax, Aurangabad
Respondent
Appearance:
Shri J.C. Patel, Advocate for the appellant
Shri H.B. Negi, SDR for the respondent
CORAM:
Honble Mr. P.G. Chacko, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
Date of hearing : 19.11.2009
Date of decision : 19.11.2009
O R D E R No:..
Per: Shri P.G. Chacko, Member (Judicial)
This appeal filed by the assessee is against the order of the learned Commissioner, whereby Service Tax of over Rs 1.5 crores along with education cess was demanded for the period 10.09.2004 to 30.09.2006 in respect of what was held to be business auxiliary service. This case is being taken up in terms of the Honble High Courts directions contained in order dated 1.10.2008 in Writ Petition No 6375 of 2008 reported in 2008 (12) STR 549 (Bom). It appears from the records that the appellant had filed an application for early hearing of the appeal in November 2008. This application registered as ST/MA/EH/2355/08 has become infructuous now that the appeal is being taken up for final disposal. The application stands dismissed as infructous.
2. After hearing both sides, we find that the short question to be considered, in this case, is whether the job work activity undertaken by the assessee during the period of dispute would constitute a business auxiliary service within the meaning of this service as defined under Section 65 (19) of the Finance Act, 1994. According to that definition, business auxiliary service means any service in relation to (i) ii
(iii)
(v) production or processing of goods for, or, on behalf of, the client;
(vi)
(vii).
and includes . but does not include any information technology service and any activity that amounts manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act 1944.
2. According to the assessee, the assessee was undertaking the job work of manufacturing alcohol-based perfumes and pharmaceutical products for various input suppliers. According to them, this activity stood excluded from the purview of business auxiliary service inasmuch as it amounts to manufacture within Section 2 (f) of Central Excise Act. Learned Counsel submits that this legal position is squarely covered by the Boards circular dated 27.10.2008 issued from F. No. 249/1/2006-CX.4. It is also pointed out that, in view of the said circular of the Board the learned Commissioner (Appeals), Aurangabad held in favour of the assessee in Order-in-Appeal No. JAK (51)215/09 dated 26.2.09. Learned counsel has produced a copy of the Appellate Commissioners order.
3. According to learned S.D.R., the aforesaid activity would remain within the ambit of business auxiliary service, because, according to him, for a job work to be kept out of the purview of the said service, the product should be one excisable. It is submitted that the products in question were not excisable to Central Excise duty and, therefore, the above activity cannot be held to be amounting to manufacture.
4. After considering the submissions, we find that the view taken by the Revenue is not in keeping with the legislative intent underlying the above definition of business auxiliary service. The legislative intent was clearly brought out in the Boards circular, the relevant portion of which reads as follows:
3.2 In the draft circular dated November, 2006, it was mentioned that as alcoholic beverages are not covered under central excise law, the production of beverages would not fall within th meaning of manufacture within the meaning of clause (f) of section 2 of the Central Excise Act. Thus, the exclusion clause would not apply to production of non-exisable goods, resulting in its coverage under Business Auxiliary Service (BAS). However, the matter was re-examined in detail by the Board after receipt of the responses and it has now been concluded that the exclusion would be applicable in the instant case for the following reasons.
(a) Plain reading of Section 3 of the Central Excise Act, 1944 shows that for levy and collection of central excise duty, the following conditions must be satisfied, * The process undertaken must amount to manufacture as defined under section 2 (f); and * The result of such process should be emergence of excisable goods, which as per section 2 (d) are the goods specified in the First and the Second schedule of the Central Excise Tariff Act, 1985 as being subjected to duty of excise.
Therefore, manufacture and excisable goods are two independent concepts and that it is not necessary that a process amounting to manufacture within the meaning of section 2 (f) should always result in emergence of an excisable goods and vice versa. Whether a process would amount to manufacture within the meaning of section 2 (f) has to be seen independently, based on the criteria evolved through various judgements of the apex court. There may be a case, when a process may amount to manufacture under section 2 (f) but it may not result in emergence of an excisable product. If that be so, then the exclusion clause under BAS, which refers only to the activity amounting to manufacture within the meaning of section 2 (f), would still apply to such processes, whether or not the resultant product are excisable goods. Such is the case of production of alcoholic beverages, which qualifies to be a process amounting to manufacture within the meaning of section 2 (f), when read with the relevant judicial pronouncements, because a new product, with a distinct name, character or use; and capable of being marketable, emerges; and
(b) In the instant case the exclusion provision under the definition of Business Auxiliary Service (under the Finance Act, 1994) makes a reference to a definition (of the word manufacture) figuring under another Act (i.e. The Central Excise Act, 1944). It is a settled law that when a definition from an Act is transposed into another Act, it is as if the said definition is physically written into the borrowing Act without any reference to the context of such definition in the Act from which it is being borrowed. It is the words of that definition, which is imported into the borrowing Act and not the scope of the first Act and the context in which such definition is used in the first Act. Admittedly the scope of the two Acts would be distinct and if the definition is borrowed from the first Act into the second Act having different scope, the same would get disturbed/distorted if the context and scope of the earlier Act is also imported. Thus just because Central Excise Act does not extend to the manufacture or production of alcoholic beverages meant for human consumption, it cannot be said that the term manufacture used in Business Auxiliary Service would also not cover the process of making the said product, namely alcoholic beverages.
3.3 In view of the foregoing, it was decided that if the CBU undertakes complete process of manufacture of alcoholic beverage under the contract bottling arrangement as described above then such activity would not fall under the taxable service, namely the BAS. However, in case the activity undertaken by the CBU falls short of the definition of manufacture (such as activity of packing or labelling alone) then such activity would fall within its ambit and would be charged to service tax.
5. The learned Commissioner (Appeals) in Order-in-Appeal No. 215/09 ibid rightly followed the above view and held in favour of the same assessee on a similar set of facts. Nobody has claimed before us that Order-in-Appeal No 215/09 ibid was appealed against.
6. In the result, the contra view taken by the Commissioner in the impugned order is set aside and this appeal is allowed.
(Dictated in Court) (B.S.V. Murthy) (P.G. Chacko) Member (Technical) Member (Judicial) rk 6