Ignited ideas yet to be extinguished – Intaxication at its worst - Service Tax on Liquor manufacturers – Draft Circular kept in cold storage?
A number of distillers are engaged in manufacture of Indian Made Foreign Liquor of various brands, on job work basis, on behalf of the brand owners. The activity involves blending, manufacturing, bottling, labelling, etc. These job workers do not have any proprietary rights over the goods produced. They are paid job charges by the brand owners who have the proprietary rights over the goods and who market and sell the IMFL produced by job workers. A doubt has arisen as to whether this activity of job worker falls under the category of taxable service, namely, 'Business Auxiliary Services' for the purposes of charging service tax under the Finance Act, 1994.
The Board vide F.No. 249/1/2006-CX.4 had issued a Draft Circular saying that the above activity falls under Business Auxiliary Service and the IMFL job workers are liable to pay service tax. The circular was issued to elicit response from the public and the responses to the above Draft Circular were to be sent by 20.10.2006.
Nearly 20 months have passed since the draft circular was issued and the second birthday is fast approaching and the draft circular remained as draft so long. What happened to the responses? Has the Board forgotten the Circular? Or is the response from the Liquor lobby so strong that the file has been kept in the cold storage?
In a case reported yesterday in TIOL, the West Zonal Bench of Tribunal prima facie held that “it is only manufacture of goods liable to Central Excise duty which would stand excluded from the purview of Business Auxiliary Services” and ordered pre-deposit of Rs 25 Lakhs
After taking its own sweet time of almost two years and finally if the Board says Service tax has to be collected, how do they expect the field to raise demands when the matter was within the knowledge of the Board and no suppression can be invoked? Board has ignited confusion in the minds of trade and field formations and just forgot to extinguish it.
Please also see 05 10 2006