Packing activity without emergence of a new product remains taxable as packaging service, not manufacture.

Mere packing of bumpers for a tractor manufacturer, where no new product emerges, does not amount to manufacture under Section 2(f) of the Central Excise Act. The activity therefore remains within the taxable category of packaging service under Section 65(76)(b) of the Finance Act, 1994. On that basis, the service tax demand was sustained. The appellate authorities had also already granted cum-tax benefit, excluded the value of goods transferred, and waived penalties under Sections 77, 78 and 80 of the Finance Act, 1994.

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Issues: Whether packing of bumpers undertaken for a tractor manufacturer amounted to manufacture so as to fall outside service tax, and whether service tax was exigible on the packaging activity.

Analysis: The activity carried out by the assessee was found to be only packing of bumpers and no new product emerged from the process. On that factual basis, the statutory concept of manufacture under Section 2(f) of the Central Excise Act was held inapplicable. The lower authorities had already examined the matter in detail and concluded that the activity was taxable as packaging service under Section 65(76)(b) of the Finance Act, 1994. The appellate authority also had already extended cum-tax benefit, excluded the value of goods transferred, and waived penalties under Sections 77, 78, and 80 of the Finance Act, 1994.

Conclusion: The packaging activity was held taxable and the challenge to service tax liability failed.

Ratio Decidendi: Mere packing activity that does not bring into existence a new product does not amount to manufacture and remains exigible to service tax where the taxable entry covers packaging service.

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