Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/Case Law/2013-14/1655

Whether packaging that is statutorily required and forming part of manufacture, also leviable to service tax?

Case:-NEW ERA HANDLING AGENCY Vs COMMISSIONER OF CENTRAL EXCISE, GOA

Citation:-2013-TIOL-975-CESTAT-MUM

Brief Facts:- The  appellant are  engaged  in providing  packaging  activity  services  in  relation  to  fertilizer  manufactured  by  M/s.  Zuari Industries  Ltd., Goa,  for which  they  received consideration.  The  department was  of the  view that  the  activity  undertaken  by  the  appellant  would  come  within  the  purview  of  packaging services as defined in Section 65 (76b) of the Finance Act, 1994 and therefore, appellant are liable  to  pay  service  tax  and  accordingly  a  show-cause  notice  was  issued  to  the  appellant demanding service tax for the period 16/06/2005 to 31/03/2010 vide notice.  The notice was adjudicated vide  the impugned order  and the  demand was confirmed along with interest thereon and equivalent amount of penalty was also imposed apart from a penalty. Hence, the appellant filed appeal before Tribunal.

Appellant’s Contention:-The appellant  submits  that  the  Fertiliser  (Control)  Order,  1985  (FCO) governs the  transaction relating  to manufacture, sale  and distribution of  fertilizers and  as per clause 19 of the said Order, there are restrictions on manufacture, sale and distribution of the fertilizers which  read as follows.  "No person shall  himself or by any  other person on  his behalf sell, offer for sale, stock or exhibit for sale or distribute (i) any fertilizer the container whereof is not  packed and  marked in  the manner  laid down in  this order;  (ii) any  fertilizer the  label or container  where  bears  the  name  of  any  individual  firm  or  company  purporting  to  be manufacturer of the fertilizer, which individual, firm  or company is fictitious or does not exist". Further  as  per  Clause  21,  the  requirement  with  regard  to  the  packing  and  marketing  are enumerated apart from the weight and size of the package. Thus, the packing of fertilizer is a statutory  activity  under  the  Fertilizer  Control  Order,  without  which  the  fertilizer  cannot  be marketed.  Section  2(f)  of  the  Central  Excise  Act,  1944  defines  "manufacture"  to  include  any process, incidental or ancillary to the completion of a manufactured product. The manufacture of fertilizer is complete only when the packaging is done. The definition of packaging activity in 65(76b)  of  the  Finance  Act,  1994,  excludes  packaging  of  fertilizer  since  the  said  section excludes any  activity which amounts  to manufacture under Section  2(f) of the  Central Excise Act,  1944.  He  also  relies  on  the  decision  of  the  Tribunal  in  the  case  of  Afco  Industrial  & Chemicals Ltd., Vs. Collector of Central Excise and Customs, Pune, reported in 1987 (32) ELT 220 (Tribunal) wherein in respect of chemicals  Barium Chloride and Barium Chloride Anhydrous, it was held that packaging is essential for completion of the manufacturing activities. Similarly, in the case of Flex Engineering Ltd., Vs. CCE, UP, reported in 2012 (267) ELT 153 (SC) - (2012-TIOL-01-SC-CX),  the  hon'ble  apex  Court  held  that  if  the  product  is  not  saleable,  it  will  not  be marketable and consequently process of manufacture is incomplete and excise duty would not be leviable on it. Applying the ratio of the above decisions to the facts of the present case, it can be seen that without packaging, fertilizers cannot be marketed and therefore, packaging is integrally  connected  with  the  completion  of  the  manufacturing  process  and  hence,  the  said activity falls squarely under Section 2(f) of the Central Excise Act, 1944. Besides, he relies on the  decision  of  the  Tribunal  in  the  case  of  Commissioner  of  Central  Excise,  Ahmedabad  Vs. Prem  Conductor,  reported  in  2009  (15)  STR  750  (Tri-Ahmd)  -  (2007-TIOL-2258-CESTAT-MUM) wherein  the  Tribunal  held  that  even  testing  and  inspection  would  form  part  of  the manufacturing activity.  In the light of these decisions,  he prays for  grant of stay  against the impugned order.

Respondent’s Contention:- The Respondent on the other  hand contends that the manufacture  of  fertilizer  is complete  even  before  they  are  packed and  even  after  packaging, fertilizer remains fertilizer and therefore, the process of the packaging undertaken in the instant case will not come within the purview of "manufacture" as defined in Section 2(f) of the Central Excise Act, 1944.

Reasoning Of Judgment:-  After considering the submissions made by both the sides, it was concluded that from  the Fertiliser (Control) Order,  1985, it is clear  that the fertilizer cannot  be marketed without packaging, in the manner specified under the said order and thus packaging of fertilizer is a  statutory requirement.  If that be so, marketing  of fertilizer cannot  be take  place without packaging.  Under  Section  2(f)(i) of  the  Central  Excise  Act,  1944, "manufacture"  includes  any process  incidental  or  ancillary  to  the  completion  of  a  manufactured  product.  Thus  the completion  of fertilizer  as  a  manufactured product  would  be over  only  when  the packaging  is completed.  Without packaging, fertilizer cannot be marketed.  Therefore,  there  is merit  in  the contention  of  the  appellant  that  the  activity  of  packaging  undertaken  in  respect  of  fertilizer would  form an  integral part  of  the manufacturing  activity and  cannot  be viewed  as a  service activity,  especially  in  the  context  of  the  packaging  activity  as  defined  in  Section  65  (76b) which  excludes form  its  scope any  activity of  manufacture  as defined  in  Section 2  (f) of  the Central  Excise  Act,  1944.  Thus,  the  appellant  has  made  out  a  strong  case  in  their  favour against pre-deposit of the dues adjudged. Accordingly,  we  grant  unconditional  waiver  from  pre-deposit  of  dues  adjudged  in  the impugned order and stay recovery thereof during the pendency of the appeal.

Decision:-Stay granted

Comment:-  The analogy drawn from this case is that if packaging is statutory requirement for any product and accordingly, marketing  of that product cannot  be take  place without packaging, then packaging activity is essential activity and will form part of the manufacturing activity. Accordingly, when the said packaging activity would amount to manufacture, it would be leviable to excise duty and service tax would not be leviable on the same.

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com