M/S. Chhattisgarh Distilleries Ltd vs C.C.E., Raipur

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes

Appeal No.ST/312/2009-CU[DB]

[Arising out of Order-in-Original No.COMMISSIONER/RPR/11/2009, dated 03.02.2009 passed by the C.C.E., Raipur]

M/s. Chhattisgarh Distilleries Ltd. Appellants

Vs.

C.C.E., Raipur Respondents

Appearance

Shri Manish Gaur, Advocate - for the appellants

Shri Govind Dixit, DR - for the respondents

CORAM: Honble Honble Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

Final Order No.50916/2015, dated 05.03.2015

Per Mr. R.K. Singh :

The Appeal has been filed against Order-in-Original No No.COMMISSIONER/RPR/11/2009, dated 03.02.2009 in terms of which a service tax demand of Rs.4,39,26,388/- was confirmed along with interest and penalties.

2. The facts of the case, briefly stated, are as under:-

The appellants, manufacturers of country liquor, were also engaged in the activities of bottling, labelling, affixing the hologram stickers and sealing of glass bottles of country liquor. Investigations revealed that the State Excise Department was making payments to the appellants only for country liquor manufactured by them and charges for activities viz., bottling, labelling, affixing the hologram stickers and sealing by pilferage proof caps of the glass bottles of country liquor were collected by the appellants in the name of issue price at the prescribed rates approved by the State Excise Department. During the period 01.04.2007 to 31.03.2008, the appellants collected Rs.35,53,91,489/- towards the said activities. Revenue held that the services in the form of the said activities fall under the category of Packaging Services and accordingly confirmed the impugned demand along with interest and penalties.

3. The appellants have argued that (i) they were manufacturers of liquor and bottling, sealing, labelling, etc. were part of the overall process of manufacture upto the point of clearance and therefore they cannot be said to have provided Packaging Services. (ii) Their case is covered by the judgements in the cases of Maa Sharda Wine Traders Vs. CCE [2009 (15) (STR 3 (M.P.)] and Kedia Castle Delleon Industries Ltd. Vs. CCE [ 2011 (22) STR 15 (Tri.  Del.)].

4. Ld. Departmental Representative on the other hand states that as the charges for packaging activities were recovered separately, it cannot be said to be integral part of the manufacturing process and that the judgement of High Court of Madhya Pradesh in the case of Maa Sharada Wine Traders (supra) is not directly applicable because in the present case, the appellants were doing additional activities in addition to the activities covered in the case of Maa Sharada Wine Traders (supra).

5. We have considered the contentions of both sides. There is no dispute that the appellants had been manufacturing and clearing alcoholic beverages. It is also not the Revenues case that the appellants were only doing packaging activities and the processes prior to packaging were done by someone else. In these circumstances, the appellants are clearly manufacturers of liquor. Indeed manufacturers of any product which involves packaging for clearance are never held to be providing packaging services because while every process of manufacture may not amount to manufacture, Manufacture includes any process incidental or ancillary to the completion of a manufactured product as per Section 2(f) of Central Excise Act, 1944. Thus for a manufacturer of goods, packing them (prior to their clearance) is a process of manufacture and not provision of service. In the case of Maa Sharada Wine Traders (supra), the M.P. High Court has categorically held that manufacturing process does not necessarily include excisable goods, but also includes process incidental or ancillary to completion of manufactured product. The High Court further held that bottling is manufacturing process and packaging and bottling of liquor being covered under manufacture are not liable to service tax. While passing the said order, the M.P. High Court overruled the decision in the case of Vidhachal Distilleries Pvt. Ltd. Vs. State of M.P. [2006 (3) STR 723 (MP)]. As regards the contention of the Departmental Representative that in the present case the appellants were doing additional activities in addition to those covered in the case of Maa Sharada Wine Traders (supra), suffice to say that when the activities involved in the case of Maa Sharada Wine Traders were held to be covered under manufacture, the activities involved in the case of Maa Sharada Wine Traders (supra) plus some more would be covered under manufacture even more. Indeed in the case of Kedia Castle Delleon Industries Ltd. (supra) (as the appellants were earlier known), following the M.P. High Court judgement in the case of Maa Sharada Wine Traders (supra) the CESTAT has held a similar demand to be unsustainable.

6. In the light of the foregoing, we allow the appeal and set aside the impugned order.

(Justice G. Raghuram)

President

(R.K. Singh)

Member (Technical)

SSK

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