Grinding wheat into products is manufacturing under Central Excise Act

The Appellate Tribunal CESTAT CHENNAI held that grinding wheat into wheat products like maida, atta, suji, and bran constitutes manufacture under Section 2(f) of the Central Excise Act, 1944. The activity was found not subject to service tax but Central Excise duty. The Tribunal relied on the Central Excise Tariff and CBEC clarification that the milling process creates new commodities. Following the Board's confirmation, the appeal was allowed, service tax demands were dropped, and similar cases were resolved favorably based on the Board's instructions.

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Issues:
1. Whether the process of grinding wheat into wheat products amounts to manufacture.
2. Whether service tax is leviable on the activity.

Analysis:
1. The appellants were engaged in grinding wheat into wheat products like maida, atta, suji, and bran. The dispute revolved around whether this process constitutes manufacture under Section 2(f) of the Central Excise Act, 1944. The appellant argued that the various processes involved, such as cleaning, grinding, and milling, amounted to manufacturing. The adjudicating authority, however, held that the activity did not amount to manufacture and was subject to service tax under Business Auxiliary Service. The CBEC clarified that the conversion of wheat into products like flour, maida, suji, etc., indeed amounts to manufacture, as a new commodity emerges from the milling activity. The Central Excise duty history and the specific mention of wheat flour in the Central Excise Tariff further supported this view.

2. The Revenue initially sought time to verify the Board's letter, which confirmed that the grinding of wheat into wheat products would amount to manufacture, and thus, no service tax levy would apply. Similar demands in other cases were confirmed but later set aside based on the Board's clarification. The Board had accepted the issue that the process constituted manufacture and that no service tax was applicable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief. The Board's instructions were followed in various cases, leading to the acceptance of appeals and the dropping of service tax demands.

This comprehensive analysis of the judgment highlights the key issues of whether the grinding of wheat into wheat products amounts to manufacture and the leviability of service tax on the activity. The judgment's detailed examination of the processes involved, legal interpretations, and the Board's clarifications provides a thorough understanding of the decision reached by the Appellate Tribunal CESTAT CHENNAI.

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