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2013 (5) TMI 477 - HC - Service TaxLevy of service tax on packaging activity - palletizing of cargo for export - Section 65(76b) - classification - held that:- It is common knowledge that small consignments of goods to same destination are packed in groups and loaded in containers to prevent damage to the goods and to save time and cost in loading and unloading. This is exactly what is done by the appellant. If appellant’s service falls within the exception clause of Section 65(23)(b) of the Act, then certainly there is no justification to make an adjudication demanding tax. On the other hand, if appellant is engaged in packaging activity falling under Section 65(76b) then adjudication has to be upheld. In this case the controversy arose only because packing is covered by both sub-sections (23) and (76b) of Section 65. However, we find a distinction between the “packing” covered by sub-section (23) and the “packing” covered by sub-section (76b). In our view, the packing covered by sub-section (76b) is the basic packing of products either in the course of manufacturing or subsequent to manufacturing for marketing. This work is not done by the appellant because the appellant is not a manufacturer or packer for manufacturers of goods. On the other hand, the packing i.e. covered by the broad definition of “cargo handling service” under sub-section (23) is the group packing of cargo for easy handling. As already explained above, the packing done by the appellant is group packing in a rough form just for easy loading into containers or ships, of goods taken by shipping companies in loose form for transport to same destination. So much so, in our view, the packing done by the appellant forming part of “cargo handling service” is not the type of packing referred to in sub-section (76b). Regarding exemption in relation to export - held that:- In fact all kinds of incentives such as tax and duty exemptions are allowed for export cargo to make the Indian goods competitive in international markets. If service tax is demanded at the last point packaging of goods for loading into containers or ships, the same will certainly lead to escalation of cost for export by way of freight increase, and that is the reason why service tax exemption is provided for handling of export cargo. We, therefore, feel the adjudication order defeats the very purpose of exemption covered by sub-section (23)(b) of Section 65. Demand set aside - decided in favor of assessee.
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