Job Of Bottling, Blending And Labelling Indian Made Foreign Liquor Does Not Amount To Taxable Service Under 'Business Auxiliary Service': CESTAT

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the job of bottling, blending and labelling Indian Made Foreign Liquor (IMFL) does not amount to taxable service under "Business Auxiliary Service".

The two-member bench of P. Dinesha (Judicial Member) and Sanjiv Shrivastava (Technical Member) have observed that if the Completely Built-Up Unit (CBU) undertakes the complete process of manufacture of alcoholic beverages under the 'contract bottling arrangement', then such activity would not fall under the taxable service.

The respondent/assessee is engaged in carrying out the job of bottling, blending, and labelling of Indian-made Foreign Liquor (IMFL) on their work premises. Acting on intelligence, an investigation was undertaken, which culminated in the issuance of a show cause notice dated November 27, 2007. In response to the Show Cause Notice, the notice initially stated that the figures mentioned in the Show Cause Notice were wrong and requested further time to submit the documents.

On February 8, 2008, they submitted that the manufacturing process of Indian-made foreign liquor, which includes blending, bottling, and packaging, is covered by Section 2(f) of the Central Excise Act, 1944, and thus is not a business auxiliary service under Section 65(19) of the Finance Act, 1994.

The Commissioner has observed that "business auxiliary service" by definition excludes "any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Central Excise Act, 1944" from its ambit. The production of alcoholic beverages, which qualifies to be a process amounting to "manufacture" within the meaning of section 2(f), when read with the relevant judicial pronouncements, because a new product with a distinct name, character, or use; and capable of being marketed emerges. The Director of the said company, in his statement, has confessed that they manufacture and sell IMFL on behalf of their client and receive manufacturing charges from them. Their client receives the difference between the sale proceeds and the manufacturing expenses.

The company raised bills of different charges and expenses such as bottling charges, manufacturing charges, etc., incurred by them for the production of IMFL on behalf of their clients and had been paid also. They sell alcoholic beverages as per the directions of JIL and CML. They receive consideration, i.e., job charges, for undertaking the manufacturing activity on a job-work basis.

The Commissioner has observed that, as per Board's Circular No.249/1/2006-CX.4 dated 27.10.2008, the whole process would amount to "manufacture" within the meaning of section 2(f) of the Central Excise Act, 1944, even though IMFL, a non-excisable product, is emerging finally. As such, the service of production rendered by M/s. Hi-Tech Bottling Pvt. Ltd. for the manufacturing of IMFL in the instant case is covered under the exclusion clause of section 65(19) of the Finance Act, 1994 and cannot be subject to levy under "Business Auxiliary Service". The authorities dropped the demand for service tax on the activities carried out by the assessee.

The tribunal did not find any reason to differ from the conclusions arrived at by the Commissioner.

Case Title: Commissioner of Central Excise & Service Tax, Bhubaneswar-I Versus

Citation: M/s.Hi-Tech Bottling Private Limited

Date: 27.07.2022

Counsel ForAppellant: K.Chowdhury

Counsel For Respondent: None

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