Manufacture of semi-finished batteries excludes the process from service tax, while refund was left open for unjust enrichment findings.

Charging, filling, testing, sealing, finishing and packing semi-finished batteries was treated as manufacture because the process converted incomplete articles into complete and marketable batteries under Note 6 to Section XVI of the Central Excise Tariff Act, 1985. As a result, the activity fell outside the service tax net under Section 66D of the Finance Act, 1994. On the refund claim, the appellate forum did not finally decide admissibility because the order under challenge lacked findings on unjust enrichment, and that issue was left to be examined with other refund conditions.

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Issues: Whether the process undertaken on the batteries amounted to manufacture so as to fall outside service tax under the negative list, and whether the refund claim could be finally allowed without findings on unjust enrichment.

Analysis: The process of charging, filling, testing, sealing, finishing and packing semi-finished batteries was held to convert incomplete articles into complete and marketable batteries. Applying Note 6 to Section XVI of the Central Excise Tariff Act, 1985, the activity was treated as manufacture. Once the activity amounted to manufacture, it was outside the service tax net under Section 66D of the Finance Act, 1994. On the refund aspect, the order under challenge had not recorded findings on unjust enrichment, and the appellate forum declined to decide that question in the first instance.

Conclusion: The activity was held to amount to manufacture and service tax was not payable on it. The refund matter was not finally determined and was remanded for findings on unjust enrichment and other admissibility conditions.

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