Manufacture versus packaging service: liquor bottling and labelling treated as manufacture, removing service tax liability.

Bottling, labelling, affixing hologram stickers and sealing of liquor bottles were treated as manufacture under clause (f) of section 2 of the Central Excise Act, 1944, rather than a taxable packaging service. The Tribunal relied on the larger bench view of the Madhya Pradesh High Court that packaging and bottling of liquor form part of the manufacturing process and that the earlier contrary view had been overruled. Once the activity was characterised as manufacture, the basis for service tax under the packaging activity service entry failed, and the service tax demand was set aside.

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Issues: Whether bottling, labelling, affixing hologram stickers and sealing of liquor bottles amounted to taxable packaging activity service or fell within manufacture so as to exclude service tax liability.

Analysis: The dispute turned on whether the activity carried out by the assessee constituted manufacture within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944. The Tribunal noted that the larger bench judgment of the Madhya Pradesh High Court had held that packaging and bottling of liquor are part of the manufacturing process and that the earlier view treating such activity as liable to service tax stood overruled. Once that position was accepted, the foundation for the service tax demand under the relevant taxable service provision disappeared.

Conclusion: The activity was held to be manufacture and not taxable packaging service, and the demand of service tax was set aside in favour of the assessee.

Ratio Decidendi: Packaging and bottling of liquor, when constituting manufacture under the Central Excise Act, 1944, are excluded from service tax under the packaging activity service entry.

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