CA Anuj Mehta
After reading my article on Implication of Service Tax on the Printing Industry. A common question which has been raised by the professionals & common public is that WHETHER SERVICE TAX IS APPLICABLE ON Printing Newspapers, journals & periodicals on behalf of other person?
And I feel that on this issue there is need to through some light as this issue can be the “seed” for future litigation.
In this context, the question that arises is whether the consideration received for undertaking the said process on behalf of other person (i.e. Newspaper Co.) would be liable for payment of Service Tax under the Negative List regime w.e.f. 1 July 2012?
At this juncture it is important to note that ‘Newspapers, journals and periodicals are covered under Central Excise Tariff Entry 49021010, 49021020, 49029010 and 49029020 respectively. The rate of duty column for them is ‘Blank’.
In the new regime of service tax, ‘service’ has been defined in clause (44) of Section 65B of the Finance Act, 1994 (Act). Section 66B specifies the charge of service tax which is levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list. The negative list of services is contained in section 66D of the Act
As per clause (f) of section 66D of the Act ‘processes amounting to manufacture or production of goods’ is a service covered under ‘Negative list’.
The expression “process amounting to manufacture or production of goods” is defined in section 65B (40) of the act are as follows:
“a process on which duties of excise are leviable under section 3 of the Central Excise act 1944 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotic on which duties of excise are leviable under any State Act for time being in force.”
Thus, the ‘processes on which duties of excise are leviable under section 3 of the Central Excise Act, 1944’ are excluded from the purview of service tax.
It may be noted that “the charging Section 3 of the Act comes into play only when the goods are excisable goods under Section 2(d) of the Act falling under any of the tariff entry in the Schedule to the Tariff Act and are manufactured goods in the terms of Section 2(f) of the Act”.
Given the above, if answer to both the following questions is in the affirmative, then Service Tax will not be leviable on the aforesaid process:
Q.1 Whether process of printing Newspaper, journals, and periodicals amounts to ‘manufacture’?
Manufacture means: “some input material undergoing into a process and resulting into a different commercial commodity having different identity & utility from its input.
The expression “manufacture” has been defined in sec2 (f) of the act, according to which it 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 schedule to the Central Excise tariff act, 1985 as amounting to manufacture Or
(iii) Which in relation to the goods specified in the Third Schedule[MRP goods etc], involves packing or repacking of such goods in unit container or labeling or re-labeling 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 (Deemed Manufacture )
In the instant case, if we look at printing of ‘Newspapers, journals and periodicals in reference of above definitions we can easily say that “printed Newspapers, journals, and periodicals amounts to a manufacturing activity” As printed Newspapers, journals and periodicals having a different identity & utility from its input i.e. plain paper.
Thus answer to the question is affirmative/yes. Now let us analyses the second question.
Now, most important question need to be answered is as follows:
Q.2 Whether the process amounts to manufacture of ‘excisable goods’?
“Excisable goods” are defined in the Central Excise Act, 1944 [section 2(d)] as “goods” specified in the schedules to the Central Excise Tariff Act, 1985 which are subject to a duty of excise.
The first part lays down that excisable goods are those which are specified in the First Schedule. The second part is that such goods are subject to a duty of excise.
A PER the First Schedule viz. Chapter 49 of Central Excise Tariff reveals that the rate of duty column is ‘BLANK’ for tariff item 490210 & 49029 . which represents item such as Newspapers, journals & periodicals. Now the question arose Whether the goods for which the rate column is ‘BLANK’ can be said to be goods ‘subject to duty’ and in turn ‘excisable goods”
In this regard, analysis is as under:
|a.||As far as the items where rate of duty is mentioned, the said goods are subject to duty of excise (even if exempted by a notification) and thus qualify as ‘excisable goods’.|
|b.||As regards the items wherein the rate of duty is mentioned as NIL, the said goods are ‘excisable goods’ in view of the judgment of the Apex Court in the case of Vazir Sultan Tobacco.|
|c.|| As regards the items for which rate of duty column is BLANK [such as Newspapers, journals and periodicals under chapter 49 having taiff item i.e 490210 &490290,it has been held that if the rate column for certain goods is BLANK then the said goods are ‘non-excisable’. In the context of electricity (which is also specified in Central Excise Tariff however the rate of duty column is left BLANK) the Mumbai Tribunal in the case of Ballarpur Industries Ltd Vs CESTAT MUM (2006) observed that in view of the fact that there is no duty specified in the schedule to Central Excise Tariff Act for electricity, the same cannot be considered either as excisable goods or as exempted goods.
Given the above, the ‘Printing newspapers, journals,& periodicals would not qualify as ‘excisable goods’ as per section 2(d) of Central Excise Act, 1944.
Thus, answer to the second question is in negative.
Therefore, one can conclude that although the process undertaken is “manufacture” as defined in section 2(f) of the CEA, 1944, but it does not result into manufacture of ‘excisable goods‘ as defined in section 2(d) of the CEA, 1944 on which duties of excise are leviable under section 3 of the Central Excise Act, 1944.
Conclusion: Thus Based on aforesaid discussion now we can conclude that printing newspapers, journals, and periodicals not ‘excisable goods’. Thus service tax is applicable in all such cases.
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