Manufacture by seafood processing excludes Business Auxiliary Service where the goods become commercially distinct and marketable.

Processing, cleaning, cooking, freezing, packing and labelling of raw marine products supplied by customers was treated as manufacture because the activity produced a commercially distinct and marketable product. The processes were covered by Chapter Note 3 to Chapter 16, which deems labelling, relabelling, repacking and similar treatment that renders goods marketable to be manufacture under Section 2(f) of the Central Excise Act, 1944. As a result, the activity did not fall within Business Auxiliary Service under Section 65(19) of the Finance Act, 1994, and was not exigible to service tax on that basis. Reliance on Sterling Foods was rejected as arising in a different statutory context.

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Issues: Whether the processing, cleaning, cooking, freezing, packing and labelling of marine products supplied by customers amounted to manufacture so as to exclude the activity from levy under Business Auxiliary Service.

Analysis: The processing undertaken on the raw seafood resulted in a commercially distinct product fit for export and marketable in trade parlance. The activity fell within the expanded concept of manufacture under Section 2(f) of the Central Excise Act, 1944, as the processes were covered by Chapter Note 3 to Chapter 16 of the Central Excise Tariff Act, 1985, which treats labelling, relabelling, repacking and other treatment rendering the product marketable as manufacture. Since the activity was manufacture, it did not fall within Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. The reliance on Sterling Foods was held inapplicable because that decision arose in a different statutory setting.

Conclusion: The processing activity amounted to manufacture and was not exigible to service tax as Business Auxiliary Service.

Ratio Decidendi: Where processing of goods results in a commercially distinct and marketable product, and the process is covered by a chapter note deeming such treatment to be manufacture, the activity is manufacture and falls outside Business Auxiliary Service.

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