Custom, Excise & Service Tax Tribunal
Deep Chemicals vs Service Tax - Ahmedabad on 27 July, 2018
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No.ST/342/2009-DB
[Arising out of OIA-163/2009(STC)/LMR/Commr.(A)/Ahd dated 25.05.2009 passed by the Commr. (Appeals-
IV) Ahmedabd]
M/s Deep Chemicals Appellant
Vs
C.S.T.- Service Tax-Ahmedabad Respondent
Represented by:
For Appellant: Ms. Priyanka kalwani & Mr. Jigar Shah (Advocate) For Respondent: Mr. Amit Kumar Mishra (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing:11.07.2018 Date of decision:27.07.2018 Final Order No. A / 11552 /2018 Per: Ramesh Nair The facts of the case are that the appellants are clearing and forwarding, cum repacking agent of M/s Tata Chemicals Ltd. for the product common salt and soda ash and hold valid service tax registration under the category of C&F Service. On the basis of information it was found that the appellants were not paying service tax on the packing charges received by them from M/s Tata Chemicals Ltd. for packing the product common salt, therefore, the SCN dated 22.11.2006 was issued which was culminated into adjudication order whereby demand of service tax under the category of packaging service was confirmed and interest and penalties were also demanded. Being aggrieved by the order in original, appellant filed appeal before the Commissioner (Appeals) who after consideration of submission made by the appellant, barring penalty under Section 75A, rejected the appeal, therefore, the present appeal.
2|Page ST/342/2009-DB
2. Ms. Priyanka Kalwani & Sh. Jigar Shah Ld. Counsels appeared on behalf of the appellant. Ms. Priyanka submits that the activity of packaging of salt is amount to manufacture in terms of Section 2(f)(i) as the activity of packaging of salt is incidental or ancillary to the completion of a manufactured product. The manufacturing activity is excluded from the packaging services under the Finance Act, 1997. It is mandatory that the salt to be sold in retail package of 10Grm, 100 Grm, 200 Grm, 500 Grm, 750 Grm, 1 kg, 2 Kg, 5 Kg. Therefore, packaging of salt in retail pack makes the product complete, therefore, it amounts to manufacture.
She placed reliance on the following judgments:
New Era Handling Agency vs CST 2015 (37) STR 344 (T) Comm. Vs New Era handling Agency 2016 (44) STR J278 (S.C.) CCE vs Eastend Paper Industries Ltd. 1989 (43) ELT 201 (S.C.) She further submits that as per Circular No. 4/3/2006-Cx-I dated 19.06.2006 section 2(f) Clause (I) to (III) are all independent, therefore, as per Section 2(f)(i) independent activity of incidental or ancillary for the completion of product amounts to manufacture.
3. Sh. A. Mishra, Ld. Deputy Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that the salt is already manufactured goods and no further process either was required or carried out by the appellant. The only activity is packing activity, therefore, merely by packing activity, there is no transformation of the product salt, therefore, the activity does not amount to manufacture. She further submits that for the purpose of manufacture of Standards of Weights and Measure Rules is not relevant for Section 2(f). In this regard, he takes support from the judgment of this Tribunal in the case of Commissioner of Customs and Central Excise, Bhopal vs
3|Page ST/342/2009-DB Proctor and Gamble Home Products 2004 (167) ELT 173 (Tri Del), wherein the activity in compliance with the provision of Package Commodity Rules, 1997 was held that the same is not amount to manufacture.
4. We have carefully considered the submission made by both the sides and perused the records. We find that the appellant received salt which is completely manufactured in bulk form. The only activity carried out by the appellant is repacking of bulk salt into retail pack. Such activity cannot be treated as incidental or ancillary to the completion of a manufactured product for the reason that the product in this case common salt was already into existence. If the contention of the Ld. Counsel is accepted then there is no need of clause (ii) & (iii) of Section 2(f). In whichever product, intended legislature to make the packing activity as a manufacturing activity, either a chapter note in a respective chapter heading is provided or the goods of a particular chapter is specified under III Schedule by which packing is amount to manufacture in terms of clause (iii) of Section 2(f), since in the present case in respect of salt neither any chapter note is provided nor the same is specified under IIIrd Schedule, hence, the packing activity of salt does not amount to manufacture. As regard, the reference made to Standards of Weights and Measure Rules by the Ld. Counsel, we find that Section 2(f) does not lay down any criteria that if the activities in compliance to such Rules, the activity will amount to manufacture. Therefore, the Standards of Weights and Measure Rules is not relevant for deciding the activity of manufacture in terms of Section 2(f) of Central Excise Act, 1944.
5. As regard, the judgment relied upon by the Ld. Counsel in the case of New Era Handling Agency (supra) we find that this case is in respect of packing of fertilizer for which under the Essential Commodity Act, 1955
4|Page ST/342/2009-DB read with fertilizers Control Act, 1985 fertilizer cannot be marketed without packaging in manner specified under the said order. Moreover in such case, the assesse not having license authorizing sale of fertilizer in bulk. Therefore, the packaging of fertilizer is a statutory requirement, for this reason the Hon'ble Tribunal held that activity of packing of fertilizer is amount to manufacture, whereas such conditions are not applicable in case of packing of salt, therefore, the facts in both the cases are entirely different, hence the judgment of New Era (supra) is not applicable in the present case. As regard, the judgment of Eastend Paper Industries Ltd. (supra), the fact is that the assesse was engaged in the manufacture of different types of varieties of printing paper and during the entire process of manufacturing the wrapping paper was used. The issue was decided that use of wrapping paper is a consumption of raw material in the manufacturing process. However, in the present case the only activity is packing of salt in retail pack not the complete manufacturing of salt by the appellant, therefore, the ratio of Eastend Paper Industries Ltd. (supra) is irrelevant. As per our above discussion the activity of packaging of salt clearly cover under the packaging service defined under Section 65(25) of the Finance Act, 1994. Therefore, it is liable for service tax being not a manufacturing activity. Accordingly, the impugned order is upheld, appeal is dismissed.
(Pronounced in the open court on 27.07.2018) (Raju) (Ramesh Nair) Member (Technical) Member (Judicial) Neha