TaxTMI 
TaxTMI 
2006 (4) TMI 249
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....-I licence issued to distillers and CS-II licence issued to the retail contractors. The distiller is entitled to receive the cost price of liquor from the Government and the sealing and bottling charges from the retail contractors. The retail contractors are required to deposit the bottling and sealing charges in advance before lifting the country liquor from the warehouse. Licence (P-3) was issued to M/s. Vidhyachal Distilleries Pvt. Ltd. (in W.P. No. 2346/2006). 3. It is further averred that on 16-6-2005 Section 65(76)(b) of the Finance Act, 2005 was amended and "Packaging Activity" was also brought within the ambit of service tax. On 9th September, 2005, the Commissioner, Customs and Central Excise, Indore wrote letter (P-4) to the Excise Commissioner, M.P. It was clarified that under Section 65(76)(b) inserted by the Finance Act, 2005 the service tax was imposed w.e.f. 16-6-2005. The Excise Commissioner directed as per letter (P-5), dated 13-9-2005 all the distillers /service providers to get themselves registered with department of Excise and to pay the service tax @ 10.2% on packaging/sealing charges of Rs. 2.25 per bottle. 4. The petitioner M/s. Vindhyachal Distilleries Pv....
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....e Act, 1944, hence service tax cannot be levied on such an activity of packaging. Rule 3{3) of M.P. Country Spirit Rules, 1965 and Rule 2-A has also been relied upon to contend that manufacture of country spirit includes bottling of liquor hence sealing of country liquor is not a packaging activity within the purview of service tax but is a part of manufacturing process. No cost of country spirit is recovered from the retail contractors except cost of rectified spirit, empty bottles is recovered from the retail contractors and this amount is termed as sealing charges, which has been misunderstood as packaging charges. Bottling and sealing done is incidental to the process of manufacture to make it a marketable commodity. Sealing charges form part of manufacturing cost, hence does not attract service tax. The order not to recover the service tax is against the provision of Rule 4-A of Service Tax Rules, 1994, which was inserted w.e.f. 10th September, 2004, which provides that service tax can be passed on in the bill to next person. 6. The counsel for respondent Central Excise has relied upon the Gazette Notification which was issued for inviting the tenders for bottling and supply ....
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....hey have to abide by the decision to be rendered in the matter. 8. Shri H.S. Shrivastava, learned Sr. Counsel with Shri Girish Shrivastava, Shri Kunal Thakrey and Shri Akshat Sharma appearing in some of the petitions for petitioners and in some of the petitions for respondents/intervenors have submitted that it is not open to impose the service tax on bottling and sealing of country made liquor as that forms part of the process of manufacture as defined in Section 2(f) of the Central Excise Act, 1944. In case packaging forms part of process of manufacture, it is outside the purview of service tax as imposed as inserted under Section 65(76)(b) by Finance Act, 2005. It is submitted that without bottling and sealing, process of manufacture is not complete, it is necessary to make it a marketable commodity, hence service tax could not be imposed upon the distillers, consequently it could not be passed on to the contractors and so on. Alternatively it is submitted on behalf of distillers that in case this Court come to the conclusion that the activity of packaging is liable for service tax under Section 65 (76)(b) as inserted by Finance Act, 2005, it being an indirect tax, it is permis....
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....f 1944); Section 2(f) of the Central Excise Act, 1944 defines the process of manufacture thus: - 2(f) : "manufacture" includes any process - (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or relabelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; Section 2(d) of the Central Excise Act, 1944 defines excisable goods; thus: - 2(d) : "excisable goods" means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt; Service Tax was introduced in India vide Finance Act, 1994. Service Tax is legislated by Parliament under the residuary entry 97 of List I of the Seventh Schedule of Constitu....
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....ly of alcohol issued by the Excise Commissioner of the State or an equivalent authority where the distillery is situated, was to be submitted. The distillers situated outside of M.P. were also eligible to apply. An unconditional consent regarding supply of the spirit from the distillery situated outside M.P. to the warehouse situated in M.P. for fulfilment of supply requirement of country spirit of the area for which the tender is submitted, was to be submitted. The intention was to supply the country spirit through bonded warehouses to the retail sale contractors in sealed bottles. Spirit could be manufacture at any place out side the State also. There are certain important conditions with respect to the supply of country spirit. Condition No. 6 contains material provisions with respect to the responsibility of successful tenderers to receive empty bottles from retail contractors at the issue warehouses and charges for bottling, labelling and sealing by pilfer proof cap of the glass bottles of volume are fixed at Rs. 2.25/-per piece. Rates of deposit money for empty glass bottles payable by retail contractors was also specified in the tender notice. Condition No. 6 of the Tender n....
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....size and 70 bulk liters in glass bottles of 250 ml or 180 ml size 250 ml bottle will be used only for 60 degree under proof plain country spirit: Provided that if the retailer demands he will be supplied with country spirit of 25 degree under proof and 50 degree under proof in ISO ml and 60 degree under proof in 250 ml bottles in lieu of 750 ml and/or 375 ml bottles. (viii) However the ratio shown in clauses No. (vii) above may be changed at any time during the currency of the contract at the discretion of the Excise Commissioner. (ix) Supply of country spirit for sale through the shops run by the Excise Department shall be made on the above terms and conditions by the successful tenderer. (x) Minimum selling prices are to be printed on each kind and size of labels as directed by the Excise Commissioner. 13. It is clear that Section 65(76)(b) as inserted by the Finance Act, 2005 clearly provides "Packaging Activity" to mean packaging of goods including pouch filling, bottling, labelling or imprinting of the package and it is clear that as per the conditions of tender notice separate charges are levied for this service, which is provided by the distillers as per1 conditions of ....
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....s Court including Sudhir Chandra Nawn v. WTO - AIR 1969 SC 59; Asstt. Commr. of Urban Land Tax v. Buckingham & Carnatic Col Ltd. - (1969) 2 SCC 55, SCR at p.278: SCCp.63,para 4; Second Gift Tax Officer" v. D.H. Nazareth -(1970) 1 SCC 749; Union of India v. Harbhajan Singh Dhillon (1971) 2 SCC 779, SCC at p. 792; Bhagwan Dass Jam v. Union of India (1981) 2 SCC 135 and Western India Theatres Ltd. v. Cantonment Board, Poona AIR 1959 SC 582. SCR at p.69. The proposition has been followed in several judgments of this Court. 47. The legislative competence of Parliament also does not depend upon whether in fact any services are made available by the mandap-keepers within the definition of taxable service contained in the Finance Act. Whether in the given case taxable services are rendered or not is a matter of interpretation of the statute and for adjudication under the provisions of the statute and does not affect the vires of the legislation and/or the legislative competence of Parliament. In fact, a wide range of services is included in the definition of taxable services as far as mandap-keepers are concerned. The said definition includes services provided "in relation to use of manda....
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....ing plant the said plain/spiced country liquor is filled into glass bottles of different volume and sealed with pilfer proof caps and labels of standard pattern and specifications as prescribed by the Excise Commissioner are pasted/affixed on the bottles to make country liquor ready for supply at warehouse. The purchaser/contractor pays excise duty @ 115 per proof liter through challan, in the treasury. On presenting the challan to the Warehouse Officer, permit is issued to the contractors for taking delivery of country liquor in sealed bottles of various volume, from the distillers/bottlers. The distillers issue the stock of country liquor in sealed bottles. At the time of supply of country liquor in sealed glass bottles, the service provider recovers the deposit money of the said glass bottles by raising bills, in terms of the condition Nos. (iii) and (vi) of the tender notice dated 19-5-2005. However, the deposit money is refunded to the contractor, when empty bottles are returned back. The glass bottles are not sold but it is re-used again and again for bottling country liquor, for which the distillers also issue a separate bill termed as sealing charges bills for recovery of s....
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....lity for the Central Excise as defined in Section 2(f), in our opinion, packaging cannot be said to be part of process of manufacture as defined in Section 2(f) in the facts and circumstances of the instant case. It is clearly a service provided as per terms of tender. 16. In the instant case in the entire process it is clear that while packaging, it is only the service which is provided and for was no discrimination made while making the classification. Decision was not in context of Central Excise Act. The decision was not with respect to the activity of packaging under Section 65(76)(b) and the definition under Section 2(f). It was also laid down that bottling fee, which is charged, is not excise duty, though it is an excise revenue for the State and it was within the competence of the State entry under the entry 66 of the list second and entry 8 of the list second of the Schedule of Constitution. We are concerned about the service tax in the instant case, inserted by Finance Act, 2005. The observations were made by the Division Bench in the context of classification which was made under M.P. Excise Act, 1915 where definition of manufacture is different and whether any service ....
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....Ltd. v. State of M.P. and another - 1997 (1) E.L.T. 319 in which this Court has considered the question of classification and imposition of special bottling licence fee. It is held that if distillers bring the manufactured liquor, then they will have to pay import duty under the garb of bottling. By this device, they stand to gain save import duty. In order to save the excise revenue a class which has obtained franchise and blending material for bottling was separately classified as against the other class which is locally bottling the liquor. Classification was held to be permissible. The decision is of no assistance to the question involved in the present case. It was rendered in the context of M.P. Excise Act, 1915 for imposition of duty and there good transport operators collecting the service tax, was held to be ultra vires of the Act. The decision renders no help to the petitioners as service tax is being realised by the Central Excise from the service provider only. 18. Another decision which has been relied upon is Ashirwad Ispat Udyog and others v. State Level Committee and others - {1999) 32 VKN 65 in which definition of manufacture in M.P. General Sales Tax Act, 1958 wa....