Tribunal Rules Bottling Alcohol Liquor Manufacturing Exempt from Service Tax

The Tribunal, following the High Court decision, ruled in favor of the appellants, holding that bottling alcohol liquor constitutes a manufacturing activity exempt from Service Tax. The Tribunal set aside the Service Tax demand and granted relief to the appellants, emphasizing that bottling is integral to the manufacturing process and not an independent taxable service. The judgment was delivered on 11.12.2018 by Mrs. Archana Wadhwa, Member (Judicial), and Shri Anil G. Shakkarwar, Member (Technical).

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Issues:
1. Whether the appellants are liable to pay Service Tax for providing services in the bottling of alcohol liquor.
2. Whether the bottling of alcohol liquor by the appellants constitutes a manufacturing activity exempt from Service Tax.

Analysis:

Issue 1:
The appellants, primarily engaged in manufacturing sugar and molasses, entered into a contract with a company for bottling alcohol liquor on a job-work basis. The Revenue contended that the appellants were liable to pay Service Tax for providing services in bottling alcohol liquor. A show cause notice was issued raising a demand for Service Tax for a specific period, which was confirmed by the Commissioner, leading to penalties.

Issue 2:
The appellants argued that the bottling of alcohol liquor was considered a manufacturing activity, citing a decision by the High Court of Madhya Pradesh in a similar case. The High Court held that packaging activities, including bottling, labeling, and packaging, fall under the definition of 'manufacture.' It was emphasized that any process incidental to the completion of a manufactured product is considered manufacturing. The High Court further noted that the bottling of liquor is an integral part of the manufacturing process and cannot be considered independent. Consequently, if bottling amounts to manufacturing, the appellants cannot be deemed to provide taxable services to the liquor manufacturer.

In conclusion, the Tribunal, following the decision of the High Court, set aside the order demanding Service Tax and granted relief to the appellants. The judgment was pronounced on 11.12.2018 by Mrs. Archana Wadhwa, Member (Judicial), and Shri Anil G. Shakkarwar, Member (Technical).

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