Order date – 10 August 2022

Facts – 

• The appellant, M/s Carrycon Services Private Limited, is engaged in assisting Indian Oil Corporation Limited in producing “gas cylinders” by executing the work of segregation of cylinders, sealing of filled cylinders, de-shaping of cylinders by hydraulic pressure, spray of pesticides, disposing of collected muck/sludge, etc. into cylinders to be sold by IOCL for the purpose of domestic use within the bottling premises set up by IOCL.
• The Appellant is being paid charges as fixed by IOCL for carrying out the above gamut of activities.
• The Department was of the view that such activities tantamount to packaging service under Section 65(76b) of the Finance Act, 1994 and the same do not amount to manufacture under Section 2(f) of the Central Excise Act, 1944 in order to provide the Appellants with any exemption from payment of Service tax on such charges received.
• Further, it was alleged that the Appellant had carried out certain works contract activity in the premises of the IOCL and on which the demand has been confirmed by invoking extended period of limitation. The demands were confirmed after due process of law.
• Aggrieved the appellant filed an appeal.

Issue – 

• Whether the activities carried upon by the Appellant for the purpose of domestic use is a process amounting to manufacture or not?

Order – 

• The Tribunal observed that on a combined reading of the provisions of Section 2(f) of the Central Excises and Salt Act, 1944 and Rule 2(xxxii) of the Gas Cylinder Rules, 2004, it can be clearly inferred that the activity of filling LPG into cylinder tantamounts to the process of manufacturing.
• Further, revenue has not disputed the fact that excise duty is being paid by IOCL on clearances of gas cylinders, therefore the Tribunal hold that the activities undertaken by the Appellant would squarely be covered under the definition of manufacture under Section 2(f) of the Central Excise Act, 1944 and thus the said demand under packaging service cannot sustain. 
• The Tribunal also held, regarding the demand of works contract services, that the Appellant has not disputed the demand on merits but only on limitation. The demand was raised based on audit of IOCL records. It is found that Service tax is a self assessment regime and one cannot take the plea of being not paid/received service tax by the recipient. Therefore in interest of justice, Tribunal waived off the penalty by invoking the provisions under Section 80 of the Finance Act, 1994.
• Therefore the Appeal was partly allowed.