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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the activity of blending, labeling, packing and re-packing of Horlicks amounts to manufacture under the Central Excise law, and whether the resulting demand of service tax on conversion charges is sustainable.
Analysis: The activity undertaken involved removal of unwanted particles from bulk powder, blending with other ingredients, and packing the finished product in pouches or jars. This process changed the name, character and use of the product and resulted in a commercially distinct marketable product. The earlier order of the jurisdictional Commissioner, which had already held the activity to be manufacture, had attained finality and supported the same conclusion. The definition of manufacture under Section 2(f) of the Central Excise Act, 1944, read with Chapter Note 5 of Chapter 19 of the Central Excise Tariff Act, 1985, covered the process of repacking, labelling and other treatment rendering the goods marketable.
Conclusion: The activity amounted to manufacture and the appellant was a manufacturer, not a mere service provider. The demand of service tax on the activity was unsustainable.
Final Conclusion: The impugned orders were set aside and the appeals succeeded with consequential relief.
Ratio Decidendi: Where processing of goods results in a new marketable product and falls within the statutory definition of manufacture, the activity cannot be taxed as a service merely because it is undertaken on job-work basis.
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