TaxTMI 
TaxTMI 
2009 (6) TMI 886
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....d the raw material supplier agreed to pay the appellant the charges (separately agreed) for manufacturing the said products on Loan Licence Basis; that the department issued five SCNs covering the period from 10-9-2004 to 9/2008 on the ground that the activity of production or processing of goods for or on behalf of a client (the raw material supplier) is covered under the statutory definition of "Business Auxiliary Service (BAS in short) with effect from 10-9-2004; that it was further alleged in the SCNs that the meaning of 'manufacture' as defined under clause (f) of Section 2 of Central Excise Act, 1944 is applicable only to the word 'manufacture' appeared in the Central Excise Act and the said products manufactured by the appellant on behalf of the raw material supplier were not covered under the First Schedule to the Central Excise Tariff Act, since the said products were not excisable goods and accordingly, the appellant is liable to pay service tax for the above said period; that it was further alleged that the appellant had fully produced the said goods and were ready for sale to the customers in the market and the said goods were not used by the raw material supplier in or....
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....o, the service tax raised in the SCNs-cum-demand notices were confirmed along with interest, besides imposing equal penalty under Section 78 of the Act. 2. Being aggrieved by the above orders, the appellant has come up with the present two appeals along with stay petitions. The contentions of the appellant are summarized as under :- (i) that the question of excisability of the product will have to be decided only if the said product is the result of activity of 'manufacture' under Section 2(f) of the Central Excise Act, 1944 and hence merely because the product coming into existence is not excisable, one cannot refuse to accept the activities which has given birth to the said product; (ii) that there are catena of decisions where under in spite of product marketable and even covered under the Central Excise Tariff, the same is held as non-excisable being not manufactured product which proves beyond any doubt that any activity which brings into existence a new product is manufacturing activity falling within the definition of Section 2(f) and hence, the activity of the appellant which brings in a new product out of raw materials supplied from his client amounts to 'manufact....
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....ma Founders v. CCE - 2008 (222) E.L.T. 317, and (f) huwalka Steel Industries v. CCE - 2008 (221) E.L.T. 139. 3. PH was held on 5-6-2009 at 12.00 Noon. Shri V. B. Gaikawad, Advocate, duly authorized by the appellant appeared before me at 12.00 Noon in respect of both the appeals. None appeared from department's side despite intimation. 3.1 During the hearing, in addition to reiterating the submissions made in the appeal memorandums, he has stressed the following - (a) that in respect of appeal No. 288/2008 there is an inordinate delay of more than 16 months from the date of knowledge of the department and hence it is hit by limitation; (b) On merit, he relies on the Board's Circular No. 249/1/2006-CX.4 dated 27-10-2008, according to which when the activity amounts to manufacture but the commodity is non-excisable, the activity is not liable to be brought under 'Business Auxiliary Service' for charging service tax; (c) that as the issue involved is of interpretation, there arises no question of imposition of penalty, since no mala fide intention can be attributed; (d) that if it is held that his client is liable to pay service tax under 'Business Auxi....
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....hen the activity amounts to 'manufacture', but the commodity is non-excisable, still the activity is not liable to be brought under "BAS" for charging service tax. 4.2 In view of the above contradictory stands, it has to be seen that whether the activities undertaken by the appellant would amount to 'manufacture'; that whether the definition of 'manufacture' used in the Central Excise Law and Notification (i.e. 8/2005) issued under Central Excise Law would also cover the definition given under the Medicinal and Toilet Preparations Act, 1955. To come to a proper conclusion, it is imperative on my part to see the definition of "BAS", the definition of "manufacture" given under Section 2(f) of the Central Excise Act, 1944, the meaning of "excisable goods" given in Central Excise Act and the Explanation given for the word "manufacture" in the Notification No. 8/2005. (A) Definition of "BAS" under Section 65(19) as available from 10-9-2004 with reference to production or process of goods for or on behalf of the client the definition reads as under - "65 (19) "business auxiliary service" means any service in relation to - (i) ......... (ii) &nb....
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....ure, the semi/partly processed product should come back to the raw material suppler, who would use the same in further manufacture and clear the final product on payment of appropriate duty. Once it is linked to the duty, it automatically follows that the goods should be excisable. When it is excisable? It is excisable, when it is found mentioned in the Central Excise Tariff Act. In the instant case, though during the process, a new product comes into existence and is suffering duty under MTP Act, 1955, as claimed by the appellant, the manufacturing activity is not the same with that of the definition given in Section 2(f) of Central Excise Act, 1944. Besides, other conditions i.e. the goods should be excisable (for being excisable, the same should find a place in Central Excise Tariff Act, 1985) and come back to the original raw material supplier for further use and subsequent clearance on payment of Central Excise duty, are missing. Thus, the manufacturing activity of the appellant is different from the one envisaged in Section 2(f) of Central Excise Act, read with Notification No. 8/05 issued under Finance Act, 1994. Accordingly, the benefit of the above Notification is not avai....
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....takes processing of raw materials supplied by his client and returned back the processed/semi-finished goods to the raw material supplier (the client) for further use in or in relation to manufacture of excisable goods on which excise duty is payable on its removal. But in the instant case, no doubt, the appellant has undertaken the job work on the raw materials supplied by his client (M/s. Pfizer Limited, Mumbai) but other ingredients such as sending back the goods to his client, the nature of goods (excisable goods mentioned in the Central Excise Tariff) and clearances on payment of excise duty are missing. Therefore, the activity of the appellant is completely excluded from the purview of the said notification. In short, the activity of the appellant would clearly fall under "BAS". In this regard, the decision of the Hon'ble Tribunal Mumbai, under whose jurisdiction the present appellant is falling, in the case of M/s. Midas Care Pharmaceuticals v. CCE, Aurangabad - 2008 (12) S.T.R. 500 (Tri.-Mumbai) also squarely covers the issue on hand. Under para 7 of the above decision, it has been held that "it is apparent that the applicants are producing goods for the client and are thus....
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.... there was scope for such a belief or opinion, the failure either to take out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licensed, would not attract the penal provisions of Section 11A of the Act". 5.1 Coming to the instant case, it can be stated that there is no such confusion with regard to the taxability on BAS. The Notification No. 8/2005 is very clear that the exemption is available only to the goods which amounts to 'manufacture' in terms of sub-section (f) of Section 2 of Central Excise Act, 1944. By reading so, there will not be any ambiguity. In other words, if the intention of the legislature is to extend the exemption for every 'manufactured item', they would not have referred the 'manufacture' in terms of sub-section (f) of Section 2 of the Central Excise Act, 1944. In the scheme of Central Excise Act, the 'manufacture' has relationship with the excisable goods (excisable goods means goods which are mentioned in the Central Excise Tariff), and the notification gives exemption when excisable goods are consequently cleared on payment of excise duty. ....