Custom, Excise & Service Tax Tribunal
Howrah Commissionerate vs Anmol Biscuits Ltd on 23 February, 2022
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Service Tax Appeal No.75880 of 2017
(Arising out of Order-in-Original No.106-111/COMMR/ST-II/KOL/2016-17 dated
19.01.2017 passed by Commissioner of Service Tax-II, Kolkata.)
Commissioner of Service Tax-II, Kolkata
(Kendriya Utpad Shulk Bhawan, (3rd Floor), 180, Shantipally, Rajdanga Main Road,
Kolkata-700017.)
...Appellant
VERSUS
M/s. Anmol Biscuits Limited
.....Respondent
(Maitypara, Delhi Road, (NH-2), Dankuni, Distt.:Hooghly, West Bengal, Pin-712331.) APPEARANCE Shri J. Chattopadhyay, Authorized Representative for the Appellant (s) Shri Ankit Kanodia, Advocate for the Respondent (s) CORAM: HON'BLE SHRI P.K. CHOUDHARY, MEMBER(JUDICIAL) HON'BLE SHRI RAJU, MEMBER(TECHNICAL) FINAL ORDER NO. 75112/2022 DATE OF HEARING : 16 November 2021 DATE OF DECISION : 23 February 2022 P.K. CHOUDHARY :
The present appeal has been filed by the Revenue being aggrieved with the Order-in-Original dated 19th January, 2017 passed by the learned Commissioner, whereby the demand of service tax of Rs. 2,15,56,273/- for the period 2012-13 to 2015-16 as proposed in the Show Cause Notice dated 21st October 2016 has been dropped.
2. Briefly stated, the facts of the case are that the Respondent inter alia manufactures excisable goods namely biscuits classifiable under Chapter 19 of the Central Excise Tariff Act, 1985 (in short 'Tariff'). An investigation was conducted by the DGCEI (now DGGI) wing of the Department as regards non-payment of service tax under 2 Service Tax Appeal No.75880 of 2017 Reverse Charge Mechanism by the Respondent on the services received from various contractors engaged in packaging of its finished goods to whom payments were made on the basis of quantity of biscuits packed during the month. After the process of investigation was done, the Respondent was issued with a Show Cause cum Demand Notice dated 21/10/2016 demanding service tax from the Respondent for the period July 2012 to March 2016 under Reverse Charge Mechanism by treating the said services as 'Manpower Supply Service' as defined under Rule 2(g) of the Service Tax Rules, 1994. The said Show Cause Notice was adjudicated by the learned Commissioner wherein the entire proceedings were dropped holding that the contractors appointed by the Respondent were engaged in a process amounting to manufacture of goods and the said service was an exempted service under clause (d) of section 66D of the Finance Act, 1994 which deals with concept of negative list of services w.e.f. 01/07/2012. It was also held by the learned Commissioner that on a combined reading of the meaning of the term 'manufacture' read with the notes to the Chapter 19, and the nature of activity undertaken by the hired labourer, it is clear that the process carried on for packaging of biscuits into carton boxes is a process amounting to manufacture against which demand has been raised and since the service per se is exempted service, the question of payment of Service Tax under 'Manpower Supply Service' does not arise. The terms of the contracts were also noted while passing the Order-in-Original by the learned Adjudicating authority. Hence the present appeal by the Department.
3. Shri J. Chattopadhyay, learned Authorized Representative appearing on behalf of the Revenue Department, justified the order of the review authority and stated that the learned Adjudicating authority has merely dropped the demand on the ground that the process of packaging of biscuits amounts to manufacture and thus the same is an exempted service, however he has not taken into account the conditions as prescribed in Circular No. 190/9/2015-ST dated 3 Service Tax Appeal No.75880 of 2017 15/12/2015 for satisfying the conditions of job work. He thus relied on the grounds of appeal filed by the Department.
4. Shri Ankit Kanodia, learned Advocate, appeared on behalf of the Respondent. He contended that the order of the learned Adjudicating authority is a detailed order covering all aspects and the learned Commissioner has rightly dropped the demand of Service Tax as in the present case the contractors were appointed for carrying out a manufacturing process which makes the finished goods marketable and were also paid on per kg. of packaging done by them. He relied upon the following judgments in his favour:
a. ADITYA ENTERPRISES Versus COMMISSIONER OF CUS. & C. EX., MEERUT-II- 2020 (35) G.S.T.L. 406 (Tri. - Del.) b. COMMISSIONER OF C. EX., SALEM Versus SELDEEN WIRE PRODUCTS PVT. LTD. 2019 (20) G.S.T.L. 359 (Tri. - Chennai) c. RAMESHCHANDRA TIWARI Versus COMMISSIONER OF C. EX. & CUS., AURANGABAD 2018 (9) G.S.T.L. 312 (Tri. - Mumbai) d. AAKRITI CONSTRUCTION (P) LTD. Versus COMMISSIONER OF C. EX., JAIPUR-II 2017 (7) G.S.T.L. 478 (Tri. - Del.) e. C.C., C. EX. & S.T., AURANGABAD Versus SHRI SAMARTH SEVABHAVI TRUST 2016 (41) S.T.R. 806 (Bom.) f. SHIV NARAYAN BANSAL Versus COMMISSIONER OF C. EX., INDORE 2013 (31) S.T.R. 747 (Tri. - Del.) g. Judgment of the Tribunal in the case of M/s. Dhana Shree Enterprises Vs. CCE, Pune in Appeal No. ST/565 & 566/12
5. He further supported his contentions by referring to Order-in- Appeal dated 30/10/2019 passed for its Bihar unit wherein the learned Commissioner (Appeals), Patna has dropped the entire demand on the 4 Service Tax Appeal No.75880 of 2017 contractors appointed by the Respondent therein on the same terms as in the present case at hand by holding that such services cannot be termed as 'Manpower Supply Services'. He submits that no Appeal has been preferred by the Department against the above and thus the same has attained finality.
He further states that the departmental appeal is devoid of merits and the order of the learned Adjudicating authority should be upheld.
6. Heard both sides through video conferencing and perused the Appeal records.
7. The issue to be decided in the present Appeal is whether the activity performed by the contractors appointed by the Respondent is 'Supply of Manpower Services' or is a process amounting to manufacture leading to an exempt service under section 66D of the Finance Act, 1994.
8. We have gone through the agreements entered into with the contractors by the Respondents, relevant portion of which are as below:
" The Agent shall carry out packing of biscuits, cakes and cookies. The Agent shall comply with all the procedures, specifications, standard and other instructions as prescribed by the company from time to time including those relating to the hygiene, cleanliness and packaging quality.
3. Tools and Equipment for packaging services apart from Plant and Machineries provided by the Company shall be the responsibility of the conversion agent.
6. For all packaging to be rendered by the agent hereunder, company shall pay to the agent conversion charges which shall be mutually agreed from time to time as per Schedule 1 as annexed hereto.5
Service Tax Appeal No.75880 of 2017
13. While executing the contract, the agent/their supervisor(s) have to ensure the safety of surrounding with regard to company's work place/site and other Agent's men/machines/system etc.
14. The agent will also be responsible for ensuring safety of men and plant and machinery at the factory premises."
On perusal of the above terms along with invoices issued by the contractors, it is seen that the amount being paid to the contractors are for the activity of packaging of biscuits into carton boxes which makes them marketable to be sold to the distributors and further to the market for consumers.
9. We further note that the final products manufactured by the Respondent fall under Third Schedule of the Central Excise Act, 1944. As per section 2(f) of the Central Excise Act, 1944, 'manufacture' includes any process
(i) Incidental or ancillary to the completion of a manufactured product;
(ii) Which is specified in relation to any goods in the section or chapter notes of the First Schedule to the CETA as amounting to manufacture ;
(iii) Which, in relation to the goods specified in the Third Schedule involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including declaration or alteration of RSP on it or adoption of any other treatment on the goods to render the product marketable to the consumer.
The notes to Chapter 19 of the Central Excise Tariff Act states in para 5 as- "in relation to the products of this chapter, labelling or relabelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture."
6Service Tax Appeal No.75880 of 2017 Thus by a combined reading of the meaning of the term 'manufacture' read with the notes to chapter 19, it is amply clear that the process carried on for the packaging of biscuits into carton boxes is a process which amounts to manufacture and thus the activity carried on by the contractors in regard to the same at the premises of the Respondent has to qualify as a manufacturing process.
10. Reliance in this regard is placed on the judgment of the Hon'ble High Court of Karnataka in the case of UNION OF INDIA Versus KWALITY BISCUITS LTD [2012 (27) S.T.R. 210 (Kar.)] wherein as regards the issue of availment of Cenvat credit of Secondary packaging for biscuits such as Liquid adhesives, BOPP tapes etc., used for affixing labels on cartons in which biscuits were packed, it was held by the Hon'ble High Court that packing preserved quality and taste of biscuits. In that view, assessee was entitled to credit of duty paid on such packaging.
Thus, we are of the view that the activity of packaging of biscuits as carried by the contractors is one amounting to manufacture and the same finds a place in negative list of services under section 66D of the Finance Act, 1994 thus making the same an exempted service from levy of service tax.
11. We also find that the judgments referred to by the Respondent are also squarely covering the case of the Respondent. In this regard we refer to the decision of Manish Enterprises Versus Commissioner of Central Excise, Pune-I [2016(42) S.T.R.352(Tri-Mumbai)], wherein it was held thus ;
"6. The undisputed fact in this case is that appellant has carried out job work on behalf of their client, i.e., conversion of Aluminium Ingots to Aluminium Castings. The charges for the job work are based on the quantum of production and not against supply of manpower. Therefore activity remains as production on behalf of the client in the factory of the client. In this fact though the appellant was deputing the 7 Service Tax Appeal No.75880 of 2017 manpower but services which carried out were job work in the client's factory, the said activity amounts to manufacture, hence, does not fall under category of Manpower Recruitment Services."
12. We also find that the CBIC Circular 190/9/2015-Service Tax dated 15.12.2015 has also explained the conditions when one service can be interpreted as manpower supply or job work. In the given case since the contractors are being paid on the basis of quantity packed and not on the basis of number of persons deployed, the same cannot partake the nature of 'Manpower Supply Service'.
13. Reliance is also placed on the Tribunal's decision in the case of M/s Dhanashree Enterprises Vs. CCE, Pune in Appeal No. ST/565 & 566/12, wherein vide final order dated 10/07/2017 it was held that the department could not establish that the service provided by the Appellant are of supply of manpower. In the instant case also we find that the department has not brought any evidence in contrary to prove that the services provided by the contractors to the Respondent are in the nature of Manpower Supply.
In view of the above discussions, we do not find any reasons to interfere with the impugned order and we do so. The appeal filed by the Department is rejected, being devoid of any merits.
(Order pronounced in the open court on 23 February 2022.) Sd/ (P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/ (RAJU) MEMBER (TECHNICAL) sm