2013 (8) TMI 600 - AT - Service Tax

Tribunal Remands Case to Determine Job-Work Activities as 'Manufacture' under Central Excise Act

The Tribunal set aside the Order-in-Original and remanded the case for fresh consideration, directing the authority to determine if the appellant's ... Manufacture or Business Auxiliary Service - multi piece packaging - Whether the activity undertook by the appellant amounts to manufacture or business auxiliary services - appellant undertakes multi-piece packaging which come under the category of ‘packing or re-packing of goods and would be an activity of ‘manufacture' - Department did not make any findings as to why the activity of multi piece packaging undertaken by the appellant would not come under the definition of ‘manufacture' – Notification NO. 8/2005-ST dated 01/03/2005 grants exemption from service tax if the goods, after undertaking the job-work, are returned to the supplier of the goods further manufacture – Held that:- The definition covers not only packing but also re-packing - multi-piece packaging is done on the soaps already packed - thus it would amount to repacking and accordingly the activity would be covered under the definition of ‘manufacture' under Section 2(f) (iii) – If the soap noodles are sold as such after mixing and packing/re-packing, then the activity undertaken by the appellant would amount to ‘manufacture' - for the activity of mixing of soap noodles and packing them in bags or re-packing from small packs to big packs also – matter remanded back – appeal allowed in the favour of assessee. Issues:Classification of service as 'Business Auxiliary Service' for job-work undertaken, liability to pay service tax, applicability of duty exemption, time-barred demand.Analysis:The appeal challenged an Order-in-Original passed by the Commissioner of Central Excise & Service Tax, Nagpur, regarding the classification of services provided by M/s. Deshmukh Services as 'Business Auxiliary Service'. The appellant undertook job-work for M/s. Hindustan Unilever Ltd., involving mixing of soap bits and packaging, for which they received consideration. The Revenue contended that the activity did not qualify as 'manufacture' under Section 2(f) of the Central Excise Act, thus liable for service tax under 'Business Auxiliary Service'. A show cause notice was issued, demanding service tax, interest, and penalties. The appellant argued that the job-work activity did amount to 'manufacture' under Section 2(f) and was time-barred. They also cited an exemption notification for job-work on raw materials supplied by the recipient.The Tribunal noted that the appellant's multi-piece packaging activity could be considered 'manufacture' under Section 2(f)(iii) as per the Central Excise Act. The absence of a specific finding on why this activity did not constitute 'manufacture' was highlighted. The Tribunal emphasized that the definition of 'manufacture' included re-packing, which encompassed the appellant's packaging process. Regarding the mixing of soap noodles and repackaging, it was stated that if the goods were further sold after the process, it would qualify as 'manufacture'. However, if the goods were subject to subsequent processes, the activity would be an intermediary process exempt from excise duty. The Tribunal also pointed out the applicability of Notification No. 8/2005-ST, providing exemption if goods were returned for further manufacture.Consequently, the Tribunal set aside the impugned order and remanded the case to the adjudicating authority for a fresh consideration. The authority was directed to provide specific findings on whether the appellant's activities constituted 'manufacture' and, if not, why the benefit of the exemption notification was not extended. The appeal was allowed by way of remand, and the stay application was disposed of.