TaxTMI 
TaxTMI 
2024 (3) TMI 1043
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....ngenta India Limited. During the audit of the financial records of the respondent-assessee, the department noticed that from 01.07.2012 to 31.01.2013, the respondent-assessee has collected an amount of Rs. 2,17,40,000/- as reimbursement of fixed cost from M/s. Syngenta India Limited by issuing debit notes stating therein that "Being amount debited for reimbursement of fixed cost from July 2012 to January 2013 as per new agreement". After scrutiny of agreement dated 07.10.2010, it was noticed by the department that above mentioned amount has been paid by M/s. Syngenta India Limited to the respondent-assessee for the fact that they have agreed to not produce any goods for any other party and not use any machinery, plant and equipment or storage to manufacture products at their plant for any other party and therefore, it was felt by the department that the respondent-assessee has „refrained himself from an act or to tolerate an act by which they have agreed not to use their plant, machinery and equipments and storage facilities etc. for any other party' and for that they have charged M/s. Syngenta India Limited and such an act is taxable under the service category as mentioned u....
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....t be subjected to service tax. Revenues contention is that what JLSL was doing was manufacturing and what appellant (earlier known as PMSL) was doing was support services. 18. We find that the predominant activities for manufacture were done by appellant (earlier known as PMSL). Their plant and machinery was used and their employees were doing the processes. In the matter of deciding who is the manufacturer of excisable products, ownership of raw materials is not a critical criterion. We do not see any merit in the argument of Revenue that the activities of making available the factory and infrastructure and doing activities of raw material handling, accounting etc. are to be considered as activities distinct from manufacturing activity. All the activities done by the appellants have to be seen together and when it is so seen it is clear that they were doing manufacturing activity. For reasons already explained, the fact that PLSL was paying excise duty does not lead to a legal position that the appellant (earlier known as PMSL) was not doing manufacturing activity. The fact that appellant (earlier known as PMSL) was charging two components towards job-charges separated as fixed....
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....ny manufacture then the variable and fixed costs can be segregated into manufacturing cost and other service. Therefore, in view of the ruling in the case of Jubilant Industries Ltd. (supra), 1 am constrained to consider the variable and fixed costs as manufacturing cost. 7.5 Even though section 66 E (e) of the Act has come into effect from 01.07.2012, unless it is shown that the fixed cost was recovered independent of any manufacture, the variable and fixed costs will have to be considered as manufacturing cost and Section 66 D (f) of the Act regarding negative list of the services whereby any process amounting to manufacture or production of goods, will come into effect." On the basis of above argument, proceedings against respondent-assessee were dropped. The impugned order-in-original has been reviewed by the department and they are before us against the above referred order-in-original on the following grounds:- "6.1.4 The Commissioner in the Impugned order has held that the notice does not allege at any point that the fixed cost was recovered without any manufacture. However, at para 5 of the show cause notice F. No. V.ST. (Adj.)10/Standard/ ADC/2014 dated 22.05.2014 i....
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....uipments or storage vessels to manufacture products at the Plant for any other party other than Syngenta, the fixed amount being agreed to be paid, over and above towards manufacturing and clearance of goods in quantitative terms, which was not included in their commercial invoice for the purpose of payment of Central Excise duty, in no way can be considered as recovered towards the manufacturing of goods. Thus, such an act of refraining to do i.e. in the present case manufacture for others, is covered under the declared services defined under Clause (e) of the Section 66 E of Finance Act, 1994, is liable to Service Tax under the Finance Act, 1994. 6.1.5 The terms 'manufacture' is defined under Section 2(f) of the Central Excise Act, 1994, which is also made applicable for the purpose of levy of Service Tax under the Finance Act, 1994 and reads as : (f) "manufacture" includes any process, (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which, in r....
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...., Central Excise & Service Tax Appellate Tribunal for the correct determination of the following points arising out of the said order. 3. We have heard both the sides and perused the agreement which the respondent-assessee has entered with M/s. Syngenta India Limited. On perusal of record as well as the agreement for job work, we find that the agreement is primarily for undertaking job work for manufacturing various pesticides and the payment schedule for both, fixed as well as variable payment for manufacture of pesticides. It will be relevant to have a glance at the Schedule-II which covers the payment to be made by M/s. Syngenta India Limited to the respondent-assessee; It can be seen from the above schedule that payment for the job work for manufacturing of various kinds of pesticides has two components, firstly fixed charges per month of Rs. 16 Lacs and fixed charges up to 1500MT of per kg. basis at the rate of Rs. 5.7 per kg. for formulation and secondly for manufacturing of pesticides of above 1500MT variable rates has been given as provided in the table above. 4. We have also perused the manufacturing agreement entered into by the respondent-assessee with M/s. Syngenta I....
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....s have been paid to the respondent-assessee as an independent of all the manufacturing activity. We also think that amount of fixed cost of Rs. 16 Lacs was paid not only for maintaining strict confidentiality of propriety of the formulation of M/s. Syngenta India Limited but also for the plant and machinery which may remain unutilized during the process of undertaking job work pertaining only for M/s. Syngenta India Limited. In view of all these facts, we hold that the fixed cost which are being paid to the respondent-assessee do not fall under Declared Service category as mentioned under Section 66E(e) and the amount which is paid to the respondent-assessee is primarily for manufacturing cost undertaken by them on job work basis. 5. It is an accepted legal position that the agreement has to be considered in its entirety for the purpose of levy of service tax since the agreement is primarily for undertaking job work for manufacturing various kinds of pesticides and therefore, even if the payment for the job work is made in two types namely one as fixed and another is at variable cost, this fact will not change the nature of the agreement and same is to be considered as job work ma....
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....t Industries Limited vs. CCE, Ghaziabad - 2013 (31) STR 181 (Tri. Del.) 13. We are in agreement with the contention that the same activity cannot be considered as manufacturing and subjected to excise levy and at the same time considered to be a service and subjected to service tax. This principle does not need much discussion and is also recognized under Section 65(19) of Finance Act, 1994 levying service tax on processing of goods not amounting to manufacture. Process amounting to manufacture is kept specifically out of the scope of the entry. That being the case such an activity cannot be brought under service tax levy under "Business Support Service" because the underlying principle will apply to this entry also. The specific exclusion is not seen under 64(104c) for the reason that the legislature intended to deal with the issue under Section 65(19). We find that Revenue is also not disputing the position that manufacturing activity cannot be subjected to service tax. Revenues contention is that what JLSL was doing was manufacturing and what appellant (earlier known as PMSL) was doing was support services. 14. So the essential question to be determined is whether the impu....
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....belling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; 17. Therefore if either party was to apply for registration as a manufacturer the department would have accepted the application. Excise registration is only to the effect that one of the parties undertakes to discharge the excise duty liability on the goods manufactured. This cannot be interpreted to mean that the activity done by the other party is not manufacturing activity. Notification 214/86-C.E. only provides a mechanism by which the duty liability is fixed on the person supplying raw material and enables the clearance of the goods from the factory of actual manufacture subject to undertaking for payment of duty by the other party or its further use in the manufacture of excisable goods. In a situation where the other party (JLSL ....