Bottling and sealing of liquor treated as manufacture, excluding the activity from taxable packaging service.

Bottling and sealing of liquor were treated as part of manufacture, not a separate taxable packaging service, where the statutory excise scheme made sealed bottles necessary for marketability and sale. The exclusion in the service tax entry was read referentially with Section 2(f) of the Central Excise Act, so processes incidental or ancillary to completing the product fell within manufacture. On that basis, bottling and packaging of country spirit were held to be integral to the manufacturing process and outside the taxable category of packaging activity under Section 65(76b) of the Finance Act, 1994.

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Issues: Whether bottling and packaging of liquor falls within the expression "packaging activity" under Section 65(76b) of the Finance Act, 1994 or is excluded as a process amounting to manufacture under Section 2(f) of the Central Excise Act, 1944.

Analysis: The exclusion in Section 65(76b) is referential and must be read with the inclusive definition of manufacture in Section 2(f) of the Central Excise Act, 1944. Manufacture includes any process incidental or ancillary to the completion of a manufactured product. On the facts governing country spirit, bottling and sealing are integral to the statutory process by which the liquor is rendered marketable and fit for supply, and the liquor cannot be sold otherwise than in sealed bottles under the excise regime. The Court also relied on the consistent understanding reflected in the Board circular and prior precedent that bottling, in this context, forms part of manufacture and not a separate taxable service of packaging.

Conclusion: Packaging and bottling of liquor are part of the manufacturing process and do not attract service tax under Section 65(76b) of the Finance Act, 1994.

Ratio Decidendi: Where the statutory scheme makes bottling and sealing an inseparable and incidental part of completing the product for sale, the activity is manufacture within Section 2(f) of the Central Excise Act, 1944 and is excluded from the taxable category of packaging activity under Section 65(76b) of the Finance Act, 1994.

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