2019 (11) TMI 957 - AT - Service Tax

Tribunal rules milk processing activities as manufacture exempt from service tax

The Tribunal allowed the condonation of a 53-day delay in filing the appeal and accepted it for hearing. The case revolved around determining whether ... Manufacture - Business Auxiliary Service - exclusion from levy of service tax where activity amounts to manufacture - definition of 'manufacture' under Section 2(f) of the Central Excise Act, 1944 as informed by Chapter Note 6 to Chapter 4 of the Central Excise Tariff Act, 1985 - pasteurization and repacking from bulk to retail amounts to manufacture under Chapter Note 6 to Chapter 4 of the Central Excise Tariff Act, 1985 - condonation of delayManufacture - definition of 'manufacture' under Section 2(f) of the Central Excise Act, 1944 as informed by Chapter Note 6 to Chapter 4 of the Central Excise Tariff Act, 1985 - Business Auxiliary Service - exclusion from levy of service tax where activity amounts to manufacture - Activities of pasteurization and packing/repacking of milk by the respondent amount to manufacture and are excluded from levy as Business Auxiliary Service. - HELD THAT: - The Tribunal held that Chapter Note 6 to Chapter 4 of the Central Excise Tariff Act, 1985 treats labeling, relabeling, repacking from bulk to retail packs or adoption of any other treatment to render products marketable as amounting to manufacture. Applying that provision to the facts, pasteurization and packing from bulk milk into branded consumer pouches undertaken by the respondent fall within that definition and thereby constitute 'manufacture' within the meaning of Section 2(f) of the Central Excise Act, 1944. While clause (iv) of the definition of Business Auxiliary Service covers services in relation to production or processing of goods for or on behalf of a client, the statutory definition of Business Auxiliary Service expressly excludes activities which amount to manufacture. The Tribunal found the legal position unambiguous, accepted the respondent's contention that the processes carried out rendered the product marketable and therefore constituted manufacture, and concluded that those activities are not leviable to service tax as Business Auxiliary Service. [Paras 7, 8]Delay in filing the appeal is condoned; the Revenue's appeal is dismissed as the activities constitute manufacture and are excluded from service tax under Business Auxiliary Service.Final Conclusion: Condonation of delay allowed; on merits the Tribunal dismissed the Revenue appeal holding that pasteurization and bulk-to-retail packing of milk amount to manufacture and are not exigible to service tax as Business Auxiliary Service. Issues:Condonation of delay in filing the appeal.Determination of whether activities undertaken amount to manufacture.Exemption from payment of service tax under Business Auxiliary Service.Condonation of Delay:The appellant-Revenue sought condonation of a 53-day delay in filing the appeal, attributing it to urgent office work. The delay was condoned in the interest of justice, and the appeal was accepted for hearing.Activities Amounting to Manufacture:The case involved a tripartite agreement where the respondent undertook various activities related to milk processing. The key issue was whether these activities amounted to manufacture under the law. The respondent argued that their activities fell under the exclusion clause of Section 65(29) and were exempt from service tax as they constituted manufacturing activities. The Department contended that the activities were purely service-based and not manufacturing, thus liable for service tax under Business Auxiliary Service.Legal Analysis:The Tribunal analyzed the activities undertaken by the respondent, including pasteurization, packing, and other processing steps. It referred to Chapter Note 6 of the Central Excise Tariff Act, which states that any treatment to render a product marketable amounts to manufacture. The Tribunal found that the activities, such as pasteurization and packing, undertaken by the respondent clearly fell within the definition of manufacture as per the Act. Consequently, the Tribunal held that the respondent's activities were not subject to service tax under Business Auxiliary Service.Judgment:The Tribunal dismissed the appeal filed by the Revenue, citing that the activities undertaken by the respondent were not liable for service tax under Business Auxiliary Service as they constituted manufacturing activities. The decision was supported by a previous ruling in the appellant's own case. The Tribunal allowed the condonation of delay and upheld the dismissal of the appeal.This detailed analysis showcases the Tribunal's interpretation of the law regarding manufacturing activities and their exclusion from service tax under Business Auxiliary Service, resulting in the dismissal of the Revenue's appeal.