Service tax cannot be demanded on the sole ground that an activity does not amounts to manufacture.

PJ/Case Law/2013-14/2055

Case:- FANCY FITTINGS LTD. V/S COMMISSIONER OF CENTRAL EXCISE, DAMAN

Citation:- 2013 (32) S.T.R. 444 (Tri. - Ahmd.)

Brief Facts:- The applicant filed the stay application for waiver of pre-deposit of Service Tax of Rs. 2869419/-, interest thereof and penalties under Section 76 and 78 of the Finance Act, 1994. The said amounts have been confirmed by the adjudicating authority and upheld by first appellate authority as service tax liability on the ground that the appellant has not undertaken any activity of manufacture and hence he has not discharged service tax liability under the category of Business Auxiliary Service.

Appellant’s Contention:-The appellant by explaining the manufacturing process of ‘Barbie Dolls’, Hot Wheal Kits’, which are manufactured and cleared from their factory premises, submitted that prior to March 2006, they used to discharge the central excise duty on these goods, considering them as manufactured goods and post March 2006, the exemption notification was provided to this kind of toys. It is his submission that the Department has confirmed Service Tax liability on the ground that the activity undertaken by them would not amount to manufacture.

Respondent’s Contention:-The Respondents submitted that all those items are received in un-assembled form and mere assembly does not amounts to manufacture. It is his submission that the first appellate authority has relied upon various decisions to indicate that mere assembly will not amount to manufacture.

Reasoning of Judgment:- The Hon’ble Tribunal held that there is no dispute as to the fact that the appellant herein had received from M/s. Mattel Toys (India) Pvt. Ltd., the parts of the Barbie Dolls as well as the Hot Wheel Kits, which they assembled in the factory premises. When the goods were cleared from the appellant’s factory premises, they were complete product in the form of Barbie Dolls and Hot Wheal Kits. They held that the said activity undertaken by the appellant, prima facie, would fall under the definition of manufacture under Section 2(f) of Central Excise Act, 1944. In view of the forgoing, the appellant has made out a prima facie case for waiver of the pre-deposit of the amounts involved. Accordingly, the application for waiver of pre-deposit of balance amounts involved is allowed and recovery thereof stayed till the disposal of appeal.

Decision:- The stay application was allowed.

Comment:-The activity of receiving the parts of the Barbie Dolls as well as the Hot Wheel Kits, and assembling them as Barbie dolls in the factory premises amounts to manufacture. Merely because the excise duty exemption has been provided to such activity after March, 2006, service tax cannot be demanded on the ground that the said activity does not amounts to manufacture. The activity still amounts to manufacture and only exemption has been given to it.

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PJ/Case Law/2013-14/2055

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