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AVT Natural Products Ltd V/S Commr. of C. Ex., Cus. & S.T., Cochin

    Final Order Nos. 23248-23253/2017 in Appeal Nos. ST/982-987/2009-DB

    Decided On, 13 December 2017

    At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore

    By, THE HONORABLE JUSTICE: S.S. GARG
    By, MEMBER AND THE HONORABLE JUSTICE: V. PADMANABHAN
    By, MEMBER

    For Petitioner: Gopinath Menon and Kuriyan Thomas, Advocates And For Respondents: Harish, Deputy Commissioner (AR)



Judgment Text


1. The six appeals are against the Order-in-Original Nos. 25-30/2009, dated 8-9-2009. The appellant is working as a 100% EOU and receiving raw materials i.e. black tea from M/s. Indian Products, Karuvelipady, Cochin for processing the same into decaffeinated tea. For carrying out the process of converting black tea into decaffeinated tea on job work basis, the appellant received job work charges. The final products were ultimately exported from M/s. Indian Products, Cochin. The Department was of the view that the activity of extraction of decaffeinated tea from black tea does not amount to manufacture inasmuch as the final product as well as the raw materials are nothing but tea. Accordingly, the Department took the view that the appellant will be liable to payment of Service Tax on the consideration received for carrying out job work under the category of 'Business Auxiliary Service' defined under Section 65(19)(v) of the Finance Act, 1994. Accordingly, Service Tax was demanded for the period April, 2006 to March, 2009. Challenging the demand of Service Tax in the impugned order, the present appeals have been filed. With the above background, we heard Shri Gopinath Menon and Shri Kuriyan Thomas representing the appellant as well as Dr. Harish, Learned DR representing Revenue.

2. The Learned Counsel for the appellants submitted that the raw materials i.e. black tea, was received in the appellant's factory and the same is processed through various stages which resulted in two products - the decaffeinated tea as well as caffeine. He submitted that both the products i.e. decaffeinated tea as well as caffeine are products which are different from the raw materials and are identified distinctly in the market. He further submitted that the amount of caffeine which is present in decaffeinated tea is negligible compared to that present in the raw material i.e. black tea. Hence he argued that the product decaffeinated tea is perceived differently in the market from black tea and hence the processes which are carried out in the appellant's factory are to be considered as processes of manufacture. Secondly he argued that the job charges received by the appellant cannot be subjected to levy of Service Tax under 'Business Auxiliary Service'.

3. The Learned DR reiterates the impugned order.

4. The appellant in their factory receives raw materials in the form of black tea which is subjected to various processes which resulted in two finished products - decaffeinated tea as well as caffeine. Since the activities have been carried out by the appellant on job work basis, they have received compensation in the form of job charges from the tea manufacturer M/s. Indian Products Ltd. The Department's view is that the processes do not bring into existence any new commodity since the raw materials as well as the finished products are in the nature of tea. From the definition of 'Business Auxiliary Service' in the Finance Act, 1994, we note that the definition excludes processes which result in the manufacture of new products which will be liable to payment of excise duty. The crucial question before us is to decide is whether the processes carried out by the appellant in their factory resulted in any new product. In other words whether the decaffeinated tea is distinctly different from the raw materials i.e. black tea.

5. We note that decaffeinated tea contains far lesser amount of caffeine than black tea and the same is packaged, marketed and perceived differently by the market. Consequently we have no doubt that the processes of extracting decaffeinated tea as well as caffeine from black tea amounts to process of manufacture. In the present case, since the entire output of the appellant is getting exported there may not be any requirement to disc

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harge central excise duty. However since the process amounts to manufacture, the same will go out of the purview of the definition of 'Business Auxiliary Service' under Finance Act, 1994. Consequently there can be no demand for Service Tax on the job charges received by the appellant during the relevant period. In view of the above discussion, we set aside the impugned order and allow all the appeals filed by the appellant.
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