Custom, Excise & Service Tax Tribunal
Winsor Fashion Private Limited vs Guwahati on 4 March, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.1
Service Tax Appeal No.75591 of 2015
(Arising out of Order-in-Original No.12/Commr/ST/GHY/14-15 dated 23.03.2015
passed by Commissioner, Central Excise & Service Tax, Guwahati.)
M/s. Winsor Fashion Private Limited
(Special Shed, Mini Industrial Estate, Cycle Factory, Kalapahar, Guwahati-781016.)
...Appellant
VERSUS
Commissioner of Central Excise & Service Tax, Guwahati
.....Respondent
(G.S. Road, Bhangagarh, Guwahati-781005.) WITH Service Tax Appeal No.75964 of 2015 (Arising out of Order-in-Original No.03/Commr/ST/GHY/15-16 dated 13.07.2015 passed by Commissioner, Central Excise & Service Tax, Guwahati.) M/s. Neo Plast Private Limited (Mini Industrial Estate, Cycle Factory, Kalapahar, Guwahati-781001.) ...Appellant VERSUS Commissioner of Central Excise & Service Tax, Guwahati .....Respondent (G.S. Road, Bhangagarh, Guwahati-781005.) 2 Service Tax Appeal Nos.75591 & 75964 of 2015 APPEARANCE Shri B.L. Narasimhan, Shri Rahul Tangri, both Advocates and Ms.Payal Bharwani, Chartered Accountant for the Appellant (s) Shri S.Mukhopadhyay, Authorized Representative for the Revenue CORAM: HON'BLE SHRI ASHOK JINDAL, MEMBER(JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) FINAL ORDER NO.75337-75378/2024 DATE OF HEARING : 27 February 2024 DATE OF DECISION : 04 March 2024 .
Per : ASHOK JINDAL :
Both the appeals have common issue, therefore, both are disposed of by a common order.
2. The facts of the case are that M/s. Godrej Consumer Products Limited (in short 'GCPL') is engaged in the manufacturing and selling of mosquito repellant coils. On 19.04.2001, the first appellant entered into an agreement with Assam Powerloom Development Corporation Ltd. to take their industrial shed on lease to manufacture coils for GCPL and the appellant No.2 on 29.09.2003 entered into an agreement with Assam Industrial Infrastructure Development Corporation to take their industrial shed on lease to manufacture coils for M/s. Godrej Sara Lee Limited (in short 'GSLL'). On the basis of these agreements both the appellants were provided infrastructure, raw materials, technical knowhow, trade mark, production plan for GCPL/GSLL and GCPL/GSLL was also having quality control for the products. The appellant undertook the activity of production of mosquito repellant coils in their premises, but enquiries were conducted by the respondents with regard to activity undertaken by the appellants on the basis of the agreement 3 Service Tax Appeal Nos.75591 & 75964 of 2015 entered into by them along with GCPL/GSLL and as per the tenor of the agreement, it was alleged that the appellants were engaged in the activity of providing infrastructure support service to GCPL/GSLL for manufacturing. The matter was contested by the appellants on the premise that the activity undertaken by the appellants amounts to manufacture in terms of section 2(f) of the Central Excise Act, 1944, but the Adjudicating authority confirmed that the appellants are not the manufacturer of the goods and GCPL/GSLL are the sole manufacturer and engaged in the activity of manufacturing by using their own machines. Moreover, the appellants were not job-worker in terms of Notification No.214/86-CE dated 25.03.1986, therefore, the appellant cannot avail the benefit of the exemption Notification No.25/2012 dated 20.06.2012, that they are not the job-worker. Against the order of confirmation of demand of service tax, appellants are before us.
3. The Ld.Counsel for the appellant submits that the issue has already been settled in the case of Appellant No.1 holding that their activity amounts to manufacture, therefore, they are not liable to pay Service Tax vide Order-in-Original No.07/ADDL.COMMR/ST/2006 dated 30.11.2006 and Order-in-Original No.115/Addl.Commr./ST/GHY/2022- 23 dated 18.11.2022. Therefore, the appellants are not liable to Service Tax.
4. He further submitted that if it is held that the activity undertaken by the appellants amounts to manufacture, therefore no Service Tax is payable by them as held by this Tribunal in the case of SRD Nutrients Pvt.Ltd. v. Commr. of CGST & CX, Guwahati [2023-VIL-1200-CESTAT- KOL-ST].
5. It is further submitted that in the Positive List Regime once the activity falls under manufacture which has been excluded from the ambit of 'Business Auxiliary Service', it would not automatically fall under 'Business Support Service' in the Negative List Regime. It is the submission of the Ld.Counsel that in the Positive List Regime, the manufacturing activity is specifically excluded from the 'Business Auxiliary Service', therefore, it cannot be said that the same will fall 4 Service Tax Appeal Nos.75591 & 75964 of 2015 within the ambit of 'Business Support Service'. It is further submitted that in the Negative List Regime, manufacturing activity was specifically included in the Negative List specified under section 66D of the Finance Act, therefore, no Service Tax is payable. It is also submitted that extended period of limitation is not invocable in the facts and circumstances of the case.
6. On the other hand, the Ld.AR for the department drew our attention to the certain clauses of the agreement and it is his submission that on the basis of these agreement, which are for operation and maintenance, it clearly implicates that the activity undertaken by the appellants falls under 'Business Support Service' as they are engaged in the activity of operation and maintenance of the manufacturing activity of the GCPL/GSLL, therefore, these appeals deserve no merits.
7. Heard the parties, considered the submissions.
8. We have gone through some of the clauses of the agreement placed before us which indicate that the manufacturer is GCPL/GSLL, but the said activity has been undertaken by the appellant, as appellants are having factory premises to manufacture the goods in question and raw material and machinery being provided by GCPL/GSLL, but manufacturing activity was undertaken by the appellant by employing their own labour and the appellant is charging from the GCPL/GSLL the charges of their activity in terms of per piece basis. For better appreciation of the facts, an invoice issued by the appellant No.1 on GCPL is extracted below:-
5Service Tax Appeal Nos.75591 & 75964 of 2015 6 Service Tax Appeal Nos.75591 & 75964 of 2015
9. On going through the invoice issued by the appellant No.1, the appellant is charging price for goods manufactured by them in terms of quantity of goods manufactured. Moreover, labour has been employed by the appellant and by using their factory and manufactured the goods. These facts have not been examined by the Revenue, moreover, the demands sought to be raised only on the basis of the agreement entered by the appellants with GCPL/GSLL. Further, on the same activity in appellant's own case for the earlier period, the adjudicating authority itself, has examined the issue and observed as under:-
"I have gone through the records of the case including the written submissions of the assessee and the various documents, clarifications etc. submitted by the assessee and the agreements entered into between the service provider and Godrej Sara Lee. I find that Godrej Sara Lee is a registered central excise assessee having their registered factory at the plot belonging to the service provider taken by the former on lease basis and that they are registered by the Department for the manufacture of excisable goods viz. home insecticides in the said registered premises. Apart from the central excise registration, they are also found to be holding the licenses required to undertake manufacturing activity from various statutory bodies like the local Agriculture Department, Factory Department, Pollution Control Board, Sales Tax Department, Provident Fund and Employees State Insurance authorities etc. As such, there is no dispute that Godrej Sara Lee is the declared and licensed manufacturer of goods at the premises which fact has also been acknowledged by the Central Excise Department by issuing a registration certificate. However, it is found that Godrej Sara Lee entered into an agreement on 25.04.01 with the service provider whereunder it has been mutually agreed, interalia, that the manufacturing unit set up together in the premises of service provider would manufacture finished products using the brand name of Godrej Sara Lee as per the quality standards and specifications of Godrej Sara Lee. The agreement also details the obligations and rights of both the parties to the agreement which hare not detailed here for the sake of brevity. One of such obligations on the part of Godrej Sara Lee is to provide the service provider uninterrupted 7 Service Tax Appeal Nos.75591 & 75964 of 2015 supply of raw material for ensuring satisfactory production performance by the unit and market and distribute the products. It is also provided that the day today management of the plant is to be looked after by the service provider by way of ensuring uninterrupted supply of man power and other things as are necessary to effectively carry out manufacturing operations. The details of the obligations on both sides appear to create a case where Godrej Sara Lee is the principal manufacturer and the service provider a supporting manufacturing undertaking the actual manufacture on account and as per the requirements of the principal manufacturer in the licensed premises of the latter. The agreement obligates the supporting manufacturer to carry out day to day operations and maintenance of the manufacturing plant set up by Godrej Sara Lee. An examination of the obligations of the supporting manufacturer evidences that they operate the plant and machinery to manufacture goods, by using employees of their own. In terms of further understanding mandated in the agreement, vide the letter of Godrej Sara Lee dated 14.05.04 to service provider, remuneration is made in the form of coil conversion rates for the quantity of goods produced by the supporting manufacturer at the rates agreed upon. Verification of the bills raised in this regard evidences that the charges have been made on the basis of the quantity of products manufactured and packaged and delivered to Godrej Sara Lee. This practice of remuneration on the basis of unit quantity produced and packed further reinforces the conclusion made above that the relationship between Godrej Sara Lee and service provider is that of a principal manufacturer and supporting manufacturer in as much as the charges received are not measured in terms of value of the service rendered: instead it is measured in terms of conversion rates for the units of finished goods manufactured. This indicates that the principal activity for which charges are paid is conversion of goods out of the raw materials supplied by and in the category of principal manufacturer. The notice issued by the department has also stated that the service provider is engaged in manufacturing, processing and packaging of goods, but has distinguished and concluded the said activities to be merely extension of "support services" to assist Godrej Sara Lee to undertake manufacture of goods. However, I find that the notice has noticeably 8 Service Tax Appeal Nos.75591 & 75964 of 2015 failed to distinguish and clarify the particular activity under-taken by Godrej Sara Lee which amounted to 'manufacture' of goods when it is simultaneously acknowledged in the notice that the service provider is infact, undertaking "manufacturing, processing and packaging of goods". Therefore it is evident that though Godrej Sara Lee is a registered and licensed manufacturer, actual manufacture is undertaken by the supporting manufacturer. In this context the activity of service provider cannot be termed to be of merely a provider of support service, instead they turn out to be the 'defacto' manufacturer. In the process, one is led to the inevitable conclusion that the process undertaken by the provider of service being manufacture undertaken at the instance of Godrej Sara Lee, they cannot be termed to be a mere provider of "auxiliary services" which are liable to service tax. Instead, liability to tax under the Central Excise Law is to be discharged by them. This is supported by the Board's circular No.80/2004 dated 17.09.04 and the specific clarification issued by the Board vide F.No.257/6/2005 CX4 dated 15.07.05 to M/s. Godrej Sara Lee Ltd. The said clarifications are applicable to the issue in question and to the period involved in the case. The clarification makes it clear that even if production of goods on behalf of a client has been made a taxable service it would not be covered in the ambit of service tax if production activity under-taken is covered within the meaning of the term "manufacture" under the Central Excise Act. In the instant case, a careful examination of the nature of relationship and the totality of the activities carried out in furtherance to the agreement reveals that the process of manufacture in the instant case is undertaken by the supporting manufacturer for Godrej Sara Lee and that, the activity undertaken by them amounted to manufacture as defined in Section 2(f) of the Central Excise Act, 1944 and the goods being chargeable to excise duty, and duty being discharged by the principal manufacturer, as per law, the said activity cannot be considered to be a taxable service under the category of "business auxiliary service" and accordingly is not liable to service tax. Therefore, I find that the charges made in the notice are not sustainable and the demand made therein is not enforceable."
and dropped the proceedings.
9Service Tax Appeal Nos.75591 & 75964 of 2015
10. Further, in appellant's own case for another period, again the issue was examined and on that basis the adjudicating authority has observed as under:-
"3.4 From the submission and documents submitted by the said Noticee, I find that the said Noticee had entered into an Agreement with M/s. Godrej Consumers Products Limtied (GCPL) for providing job work services. In terms of agreement, the said Noticee undertook an activity of manufacturing of mosquito coils in accordance with the specifications given by the GCPL at the GCPL factory premises. In lieu of the said services, GCPL paid job work charges for the quantity of products processed by the said Noticee. GCPL paid Central Excise duty on the clearance of final product as the principal manufacturer.
I find that the job work activity undertaken by the said Noticee amounts to manufacture of goods which is specifically exempted from Service Tax under Section 66D(f) of the Finance Act, 1994. However, the said Noticee changed their operation arrangement with GCPL in October 2016 and started paying services tax under the head Business Support Services. For the period from April to September 2016, I find that the service provided by the said Noticee to GCPL falls under the Negative List. I refrain from dwelling further on this service as the demand for this period is time barred."
11. As the activity undertaken by the appellant is identical which amounts to manufacture, in that circumstances, the appellants are not liable to pay Service Tax on their activity as the manufactured goods has suffered excise duty at the end of the principal. In that circumstances, we do not find any merit in the impugned orders. The same are set aside.
10Service Tax Appeal Nos.75591 & 75964 of 2015 In the result, the appeals are allowed with consequential relief, if any.
(Order pronounced in the open court on 04.03.2024) (ASHOK JINDAL) MEMBER (JUDICIAL) (K. ANPAZHAKAN) MEMBER (TECHNICAL) sm