Any manufacture outside purview of Service Tax

By Vijay Kumar

Service Tax on bottling of liquor – but what is manufacture?

A process amounting to manufacture within the definition under Section 2(f) of the Central Excise Act, is outside the purview of Service Tax. Recently we carried a judgement where the High Court held that liquor bottling is liable to Service Tax because it did not amount to manufacture as per Section 2(f). But what is manufacture?

V. Unnikrishnan from Cochin has raised an interesting issue.

As per section 2 (f) of the CEA, 1944 'any activity incidental or ancillary to the completion of a manufactured goods amounts to manufacture'. There is no condition that the process should be carried out for the completion of excisable goods. So any activity incidental or ancillary for the completion of non-excisable goods also comes under the purview of section 2 (f). Accordingly, it is only to find out whether the bottling is essential for the completion of liquor. As such the liquor cannot be marketed without bottling; the activity of bottling has to be considered as manufacture for the completion of liquor. So, it is pertinently seen that activity of liquor bottling is outside the purview of 'packaging service' under Section 65 of Finance Act, 1994. It appears that the aforesaid law point was not argued in the HC . Hope the said point will be presented in the apex court.