2010 (11) TMI 3 - CESTAT, Mumbai

Rubicon Formulations Pvt Ltd Versus Commissioner of Customs, Central Excise & Service Tax,
Aurangabad, 2010 (11) TMI 3 - CESTAT, Mumbai

Service Tax on Job Working Activity - 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 - job work of manufacturing
alcohol-based perfumes and pharmaceutical products for various input suppliers.

Held that: 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 - 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.- 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 - Decided in favor of assessee

No.- ST/75/08 Mum

Dated.- November 19, 2010

Appearance:

Shri J.C. Patel, Advocate for the appellant

Shri H.B. Negi, SDR for the respondent

CORAM:

Hon ble Mr. P.G. Chacko, Member (Judicial)

Hon ble Mr. B.S.V. Murthy, Member (Technical)

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 Hon ble High Court s 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 Board s 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 Commissioner s 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 Board s 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)
, M/s Vinayak Industries Versus CCE- Jaipur2017 (1) TMI 170 - CESTAT NEW DELHI

M/s Vinayak Industries Versus CCE- Jaipur

Business auxiliary service - providing chilling facilities - whether the service comes under the head
BAS and is taxable? - Held that: - the issue has come up before the Tribunal in appellant’s own case
M/s Vinayak Industries Versus CCE & ST, Jaipur-I [2016 (6) TMI 1072 - CESTAT NEW DELHI], where it
was held that There is no doubt that chilling of milk is a treatment which renders the milk
marketable. Consequently by virtue of the chapter note, chilling of milk amounts to manufacture
and it is settled law that process amounting to manufacture is not liable to service tax - demand not
sustained - appeal allowed - decided in favor of appellant.

No.- S.T. Appeal Nos. 1530 - 1531 of 2011

Order No.- Final Order Nos. 56110-56111/ 2016

Dated.- December 26, 2016

Dr. Satish Chandra, President And Mr. B. Ravichandran, Member (Technical)

Ms. Rinky Arora, Advocate for the appellant

Sh. Sanjay Jain, AR for the Respondent

ORDER

Per Justice (Dr.) Satish Chandra

The present appeals are filed against the order-in-original No. 30-32/2011(ST) dated 20.07.2011
passed by the Commissioner (Appeals), Central Excise, Jaipur.

2. The appellant during the period under consideration, was providing chilling facilities to Jaipur Zila
Dugdh Utpadak Sahakari Sangh Limited. The department has brought the service under the Business
Auxiliary Services and levied service tax. Being aggrieved, the appellant has filed the present appeals.
3. With this background, we have heard Ms. Rinky Arora, ld. Counsel for the appellant and Sh. Sanjay
Jain, ld. AR for the Revenue.

4. After hearing both the sides, it appears that as the issue has come up before the Tribunal in
appellant’s own case reported as 2016-TIOL-2273-CESTAT-DEL where it was observed that:-

“5. It is evident from the above quoted para that in the case of Sharma Ice Factory the Tribunal came
to a finding that chilling of milk does not amount to manufacture; that being a case it is hard to
fathom as to how CESTAT concluded that chilling of milk would not amount to service classifiable
under the business auxiliary service given the definition of the business auxiliary service under
Section 65(19) of Finance Act, 1994. At this stage, we would like to reproduce Chapter Note 6 to
Chapter 4:

“6. In relation to products of this Chapter labelling or relabeling 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”.

There is no doubt that chilling of milk is a treatment which renders the milk marketable. For example
chilling of milk makes it possible to market/ sell it to the consumers at places which are located at
considerable distances. That chilling of milk is a treatment is too obvious to warrant any explaining /
discussion. Consequently by virtue of the said chapter note, chilling of milk amounts to manufacture
and it is settled law that process amounting to manufacture is not liable to service tax. In the light of
the above analysis, we agree with the decision/ conclusion in CESTAT judgement in case of Sharma
Ice Factory (supra), but, as is evident, we do so on the basis of our reasoning which is not similar to
the reasoning contained therein.

6. Coming to the contention of ld. DR that noscitur sociis principle should be applied for interpreting
the scope of any other treatment and according to the said principle, only such other treatments
which are similar to labelling or relabeling of containers or repacking from bulk packs to retail packs
would only be covered under the scope of any other treatment and therefor chilling of milk would
not be covered thereunder. We find that the other treatments mentioned in the said chapter note
are labelling or relabeling of containers and repacking from bulk packs to retail packs.”

In our view labelling or relabeling of containers and repacking from bulk packs to retail packs do not
form part of a family to which any other treatment has to belong as per the requirement of the
principle of noscitur sociis. Further, it does not cover just any other treatment but only such other
treatment which is adopted to render the product marketable to the consumers and so the
definition is not too wide and unwieldy to be required to be limited by adopting various principles of
interpretation. In these circumstances in this case we do not find any scope for applying the said
principle (i.e. noscitur sociis) which Diploc J. described as treacherous (vide Letang vs. Cooper 1965-
1QB 232). We are refraining from further elaborate discussion on this issue because applicability of
the said principle is so clearly ruled out in the present case that an elaborate discussion would
merely be an exercise in overkill.

7. In the light of the foregoing, we agree with the conclusion in the CESTAT judgement in the case of
Sharma Ice Factory (supra) and set aside the impugned order. The appeal is allowed”.

5. By following our decision the assessee s own case (supra), we find no merit in the impugned order
passed by the Commissioner (Appeals). The impugned order is set-aside and appeals are allowed
with consequential relief.

( Dictated and pronounced in the open Court )