Maa Sharda Wine Traders Vs. Union of India (Uoi) and ors. - Court Judgment

Excerpt:
- section 2(f): [dipak misra, k.k. lahoti & rajendra menon, jj] service tax - packaging and bottling of liquor whether amounts to manufacture within meaning of section 2(f) of central excise act 1944? finance act 932 of 1994), section 65 (76 b) (as amended on 16.6.2005) - held, the first limb of the inclusive definition of the manufacture under section 2(f) of central excise act has a very wide connotation. as the definition clause lays down an inclusive facet, the term manufacture has to be construed in a natural and plain manner and would include any process incidental or ancillary to the completion of a manufactured product. keeping in view the context in which the term manufacture has been used, it would take in its fold incidental and ancillary process in the manufacture or finishing of any manufactured product. it does not leave any room for doubt that an allied process should be integral and inextricable part of manufacture of completeness and presentability of the manufactured product. section 65(76b) of finance act used the words but it does not include. thus it is a definition which has the inclusive as well as exclusive facet. by virtue of the same it may include certain things and exclude others. it is well settled principle of law that a definition is not to be read in isolation and has to read in context of phrase which it defines, releasing that function of a definition is to give precision and certainty to the word or phrase which would otherwise be vague and uncertain. regard being had to the exclusionary fact in the finance act, though a limited one it would exclude the manufacturing process as defined under section 2(f) of the 1944 act. keeping in view the aforesaid dictionary clauses and circulars issued by the c.b.e.c. it is quite luminescent that would manufacture has to be understood in a broader sense and not to be confined or restricted to the excisable product in the act. it would include all processes which amount to manufacture whether or not the final product is an excisable product. in the process of manufacturing of country spirit, the over proof spirit which is not potable is reduced to issuable strength, which is potable. colouring and flavouring agents are added at the time of maturation. thereafter the liquor is supplied in sealed bottles to the retail contractors. this is the process of treatment given to over proof spirit in order to render it fit for human consumption in the form of country liquor. if the process is analysed there cannot be any scintilla of doubt that the process involves the manufacturing one under the provisions of section 2(f) of central excise act, 1944. as per the m.p. country spirits rules as well as clause 6 of the tender conditions it is mandatory for a distiller to supply country liquor in sealed bottles and not otherwise. therefore, packaging and bottling of liquor come within the ambit and sweep of manufacture within the meaning of clause (f) of section 2 central excise act, 1944 in view of the definition contained in section 65(76b) of the finance act especially keeping in view the exclusionary facet and further regard being had to the circular issued by central board of excise and customs. - sumit nema, learned counsel appearing for the petitioners, submitted that by abundant caution, he had challenged the constitutional validity of the provision but on a keener scrutiny, it is felt by him that the cause of justice would be best subserved if only the apposite interpretative process is adopted to scan the anatomy of the provisions, to arrive at the conclusion whether the bottling of liquor would invite the impost of service tax as envisaged under section 65 (76b) of the act. in the 1915 act as well as on the conditions of the tender, a licensee is under obligation to supply liquor in the sealed bottles. the entire mechanism leaves no room for any doubt that it was packaging activity, which was clearly a service activity under section 65 (76b) and not process of manufacture as defined in section 2(f) of the central excise act. even if we consider the manufacturing activity, it is clear that manufacturing activity is de hors of event of its liability for the central excise as defined in section 2(f). in our opinion, packaging cannot be said to be part of process of manufacture as defined in section 2(f) in the facts and circumstances of the instant case, it is clearly a service provided as per terms of tender. in our opinion, if merely by providing service for bottling a new commodity, does not come into being new article, it is clearly a service provided. (a) plain reading of section 3 of the central excise act, 1944 shows that for levy and collection of central excise duty, the following conditions must be satisfied: 20. in this context it is worth-noting section 65 (76b) of the finance act uses the words 'but it does not include'.thus, it is a definition which has the inclusive as well as exclusive facet. it is a well-settled principle of law that a definition is not to be read in isolation and has to be read in the context of phrase which it defines, realising that the function of a definition is to give precision and certainty to the word or phrase which would otherwise be vague and uncertain. country spirits rules as well as clause 6 of the tender conditions it is mandatory for a distiller to supply country liquor in sealed bottles and not otherwise. the reason for giving effect to such executive construction is not only the same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in a certain situation a representation made by an authority like a minister presenting the bill before parliament may also be found bound thereby. 36. in the case at hand, the circular issued by the central board of excise and customs is in consonance with the statutory provisions as well as the law laid down by the apex court in sir shadi lal distillery & chemical works (1998)8scc428 .37. though we have analysed and stated that we are unable to concur with the view taken by the division bench in vindhyachal distellaries pvt.orderdipak misra, j.1. in this batch of writ petitions, the constitutional validity of section 65(76b) of the finance act, 1994 (for short, 'the act') as amended by the finance act, 2005 was challenged primarily and principally on the ground that there is lack of legislative competence on the part of the concerned legislature to bring in such a legislation and further, assuming the legislation meets the test of legislative competence, it is violative of article 14 of the constitution of india. the aforesaid writ petitions were listed along with w. a. no. 1524 of 2007.2. in the course of hearing of the writ appeal, on behalf of the appellant therein, it was contended that the decision rendered by the division bench in vindhyachal distellaries pvt. ltd. v. state of m.p. [2007] 7 vst 197 (mp) has not appropriately considered the decision rendered in som distilleries and breweries pvt. ltd. v. state of m.p. [1997] 1 ilj 319 and various other aspects which deserve consideration. the division bench hearing the writ appeal thought it apposite to refer the matter to a larger bench. the question that has been referred reads as follows:whether bottling of liquor amounts to manufacture of liquor or only packaging so as to attract the service tax?3. it is worth-noting that w. a. no. 1524 of 2007 was held to be not maintainable by the full bench and in that backdrop, the reference was not answered. these writ petitions being connected with the writ appeal were heard by the full bench.4. mr. sumit nema, learned counsel appearing for the petitioners, submitted that by abundant caution, he had challenged the constitutional validity of the provision but on a keener scrutiny, it is felt by him that the cause of justice would be best subserved if only the apposite interpretative process is adopted to scan the anatomy of the provisions, to arrive at the conclusion whether the bottling of liquor would invite the impost of service tax as envisaged under section 65 (76b) of the act.5. keeping in view the aforesaid limited submission of mr. nema, we will not dwell upon the constitutional validity but only advert ourselves to the question whether the service tax as defined under the act in the amending provision takes in its net the bottling of liquor.6. to appreciate the factual scenario in proper perspective we shall refer to the facts in w. p. no. 700 of 2008 in brief. the petitioner purchases bottles of country spirit from the licensees who are engaged in the manufacture and supply of country liquor in sealed bottles pursuant to the licence issued by the competent authority of the state government under the provisions of the m. p. excise act, 1915 (for short, 'the 1915 act') and the rules framed therein. the rectified spirit is manufactured by the process of distillation in the distillery, the rectified spirit is blended in the warehouses, bottled, sealed, labelled and is supplied to the retail contractors. bottling licence is issued in form cs 1 appended in the m. p. country spirit rules, 1995 (hereinafter referred to as, 'the 1995 rules'). the petitioner was granted a licence in respect of the excise year 2005-06 for supply in respect of the areas mentioned therein. the said licence was issued pursuant to the tender notice dated march 22, 2005 issued by the excise commissioner and the said tender notice described 'tender notice for the manufacture and supply of country spirit in sealed bottles in various districts of the state'. reliance has been placed on clause (6) of the tender notice to highlight that the entire activity of manufacture, bottling and supply is a composite one. in the 1915 act as well as on the conditions of the tender, a licensee is under obligation to supply liquor in the sealed bottles.7. according to the writ petitioner, the process of manufacturing involves various stages, viz., manufacture of rectified spirit at distilleries ; transportation of rectified spirit from distilleries to manufacturing warehouses ; manufacturing activity (blending) to make rectified spirit fit for human consumption; bottling, sealing, packaging of country spirit. it is contended that after the rectified spirit is rendered fit for human consumption the same is filled in bottles or some other packing mode as specified by the excise commissioner under the supervision of the officer in-charge of the warehouses and sealing of the bottles is carried out as per specification and labels are affixed on each bottle and thereafter on demand of retail contractors and upon proof of payment into treasury of the issue price recoverable for it, the cs 1 licence issues bottles of country spirit to the retail contractor. the 1915 act contains provisions with regard to the manufacture, supply and sale of liquor. chapter iv of the 1915 act deals with the manufacture, possession and sale of liquor. section 13 of the act creates a bar on manufacture and collection of intoxicant except under the authority and subject to the terms and conditions of the licence in that regard. section 13(b) prohibits bottling of liquor for sale. section 15 provides for payment of duty for removal of liquor from the warehouses, distillery or brewery. section 16 restricts possession of intoxicant beyond the prescribed limit and section 17 deals with sale of intoxicants with the stipulation that no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence in that regard. reference has been made to the 1995 rules in detail to highlight how the said rules especially, rules 3 and 4, prescribe the manner of supply of liquor in sealed bottles and, therefore, the entire process of bottling is a part of the process of manufacturing which is performed under the supervision and control of the excise authorities.8. it is contended that if section 65 (76b) of the finance act and section 2(f) of the central excise act, 1944 (for short, 'the 1944 act') are read in a purposive manner, it would be clear as crystal that service tax as provided under the finance act would not be leviable on the manufacturing activity of country liquor, for the bottling is an integral and essential part of the process of manufacturing. though various other averments have been made as regards the constitutional validity of the provision, yet the same having been abandoned, it is unnecessary to refer to them.9. mr. shekhar sharma, learned counsel appearing for the respondents in his turn, on the basis of abandonment of prayer pertaining to constitutional validity, has placed heavy reliance on the decision rendered in vindhyachal distellaries pvt. ltd. [2007] 7 vst 197 (mp) and put forth that the decision rendered therein covers the field in entirety and the same being in total consonance with the provisions of the 1944 act and the finance act and the interpretation placed being absolutely impeccable, the bottling of liquor, by no stretch of imagination, can be regarded as a part of manufacturing process and, therefore, levy of service tax is totally justified.10. before we advert to the relevant provisions, we think it apt to dwell upon what has been held in vindhyachal distellaries pvt. ltd. . in the said decision the division bench posed the question whether service tax on packaging, i.e., bottling and labelling of liquor can be collected from the distillers and whether they can pass on this liability to the contractors obtaining the supplies from them. the bench referred to section 65 (76b) of the act and the provisions under the 1995 rules and section 2(d) of the 1944 act which defines 'excisable goods', the conditions of the tender, especially condition no. 6 and the transactions as per tender notice and relied upon the decision rendered in tamil nadu kalyana mandapam assn. v. union of india : [2004]267itr9(sc) wherein imposition of service tax on mandap keepers was upheld on the foundation that it is was permissible to lift the service tax on the catering services provided by the mandap keepers and the contention that it did tantamount to tax on land was rejected, and further adverted to the concept 'in relation to' as has been dealt with in the case of tamil nadu kalyana mandapam assn. : [2004]267itr9(sc) and thereafter expressed the view as under : (page 211 of 7 vst)it is clear from the transaction that only the service was to be provided for the purpose of packaging, which was controlled under the condition of tender notice and separate charges were paid for bottling, labelling and sealing, which were not forming part of the price of the country spirit. for country spirit separate bills were raised and for the aforesaid part of packaging service charges were prescribed and there were service obligations to be carried out in the form of bottling while undertaking the packaging activity. there was obligation to reuse the bottle offered by the contractors. the entire mechanism leaves no room for any doubt that it was packaging activity, which was clearly a service activity under section 65 (76b) and not process of manufacture as defined in section 2(f) of the central excise act.it may also be noted that in section 2(d) of the central excise act 'excisable goods' means those goods specified in the first schedule and the second schedule to the central excise tariff act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt. the chapter 22 of the central excise tariff act, 1985 covers beverages, spirits and vinegar. however, as per the chapter note (4) this chapter does not cover alcoholic liquors for human consumption. therefore, the activity of various distillers does not come under the purview of 'manufacture' as defined in section 2(f) of the central excise act, 1944. the bottled country liquor or its packing or re-packing activity has not been mentioned/specified in central excise tariff act. even if we consider the manufacturing activity, it is clear that manufacturing activity is de hors of event of its liability for the central excise as defined in section 2(f). in our opinion, packaging cannot be said to be part of process of manufacture as defined in section 2(f) in the facts and circumstances of the instant case, it is clearly a service provided as per terms of tender.11. after so stating, the bench proceeded to hold as under : (page 211 of vst).thus it is a service part of the activity which is being taxed, which is independent of the process of manufacture and cannot be said to be integral part of process of manufacture as excluded in section 65(76)(b) inserted by the finance act, 2005 read with section 2(f) of the central excise act. the apex court in collector, central excise, bombay v. s.d. fine chemicals pvt. ltd. : 1995(77)elt49(sc) has laid down that whether a particular process is covered by 'manufacture' as defined in section 2(f) is a question of fact, to be determined in the facts of each case. in collector of central excise, hyderabad v. jayant oil mills pvt. ltd. : 1989(40)elt287(sc) , the apex court held that all processes do not constitute manufacture. in our opinion, if merely by providing service for bottling a new commodity, does not come into being new article, it is clearly a service provided. . : 1988(35)elt6(sc) , it is held that by conversion of timber logs into sawn timber, no new produce emerged by sawing of timber, therefore, higher excise duty on sawn timber was not leviable.12. after so holding, the division bench referred to the decision rendered in som distilleries and breweries pvt. ltd. [1997] 1 ilj 319 and distinguished the same by observing as under : (page 212 of 7 vst).the decision is of no assistance to the question involved in the present case. it was rendered in the context of m.p. excise act, 1915 for imposition of duty and there was no discrimination made while making the classification. decision was not in context of central excise act. the decision was not with respect to the activity of packaging under section 65(76)(b) and the definition under section 2(f). it was also laid down that bottling fee, which is charged, is not excise duty, though it is an excise revenue for the state and it was within the competence of the state entry under the entry 66 of the list ii and 8 of the list ii of the schedule of the constitution. we are concerned about the service tax in the instant case, inserted by the finance act, 2005. the observations were made by the division bench in the context of classification which was made under the m. p. excise act, 1915 where definition of 'manufacture' is different and whether any service was rendered in the process was not the question agitated or decided. the decision is distinguishable and has no application to the controversy involved in the present petition.13. eventually, the bench expressed the opinion that service tax being an indirect tax can be passed on to the service receivers.14. it is submitted by mr. sumit nema, learned counsel for the petitioners that the interpretation placed by the division bench is not correct inasmuch as the language employed in the finance act has not been appositely appreciated. it is worth-noting that on june 16, 2005 section 65 (76b) of the finance act was amended and packaging activity was brought within the purview and ambit of service tax. the said definition reads as under:65. definitions.-in this chapter, unless the context otherwise requires:(76b) 'packaging activity' means packaging of goods including pouch-filling, bottling, labelling or imprinting of the package, but does not include any packaging activity that amounts to 'manufacture' within the meaning of clause (f) of section 2 of the central excise act, 1944 (no. 1 of 1944).15. on a scrutiny of the said definition, it is quite clear that packaging activity means packaging of goods including pouch-filling, bottling, labelling or imprinting of the package but the definition does not stop there, as the provision expressly shows, it does not include any packaging activity that amounts to manufacture within the meaning of clause (f) of section 2 of the 1944 act. section 2(f) of the 1944 act reads as follows:2. definitions.-in this act, unless there is anything repugnant in the subject or context,:(a) ...(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 relation to the goods specified in the third schedule involves packing or repacking of such goods in a unit container or labelling or re-labelling 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.16. the learned counsel for the petitioners has laid immense emphasis on sub-clause (i) of clause 2(f) which deals with 'incidental or ancillary to the completion of a manufactured product'. the learned counsel submitted that if bottling is treated as incidental or ancillary to the completion of a manufactured product, i.e., the country spirit, indubitably, would come within the sweep of the definition and get out of the net of packaging activity as defined under section 65 (76b) coming within the non-inclusive facet. the learned counsel has submitted that the definition is absolutely clear and there is no ambiguity. in this regard it would be fruitful to refer to two circulars, issued by the central board of excise and customs one bearing no. 249/1/2006 dated november, 2006 and another being circular f-no. 249/1/2006 - cx.4, dated october 27, 2008. the board was dealing with the similar definition in the context of business auxiliary service in the finance act, 1994 where similar exclusionary clause is stipulated in the definition clause. the relevant extract of 2006 circular is as under:the activities undertaken by the cbus is appropriately classifiable under clause (v) of the definition of 'business auxiliary service' which reads as under:(v) production or processing of goods for, on or behalf of the client ; this taxable service, however, excludes from its purview 'any activity' that amounts to 'manufacture' within the meaning of clause (f) of section 2 of the central excise act, 1944'. in other words even if a service provider produces or processes goods on behalf of the client ; such activity would go out of the purview of the said taxable service, if the same amounts to manufacture as under central excise law. this poses a secondary or a related question because of the fact as per the entry no. 92c in list i of the seventh schedule to the constitution of india, the union excise duty is not extendable to the manufacture of potable liquor or alcoholic beverages for human consumption. such being the case, a question arises as to whether the manufacture of potable of imfl should be excluded from the purview of business auxiliary service. there is no doubt that the process of making imfl from its raw material involves change in name, character and use that have been laid down as criterion for a process being amount to manufacture by the judicial pronouncement of the apex court. but the question remains that irrespective of such laid down principles, the process of making imfl would remain within the purview of section 2(f) of a union act which does not extend to the final product in question, namely, imfl. on this subject the opinion of the ministry of law is that 'even though the definition under the central excise act are for the purpose of that act, yet by referential legislation, a few of them have been borrowed by reference to the first act'. in other words when a definition from an act is transposed unto another act, it is the scope of that definition which is imported into the borrowing act and not the scope of the first act and the context in which such definition is used in the first act. admittedly the scope of the two acts would be distinct and if the definition is borrowed from the first act into the second act having different scope, the same would get disturbed/distorted if the context and scope of the earlier act is also imported. this is primarily a substitute to writing the entire defining terms in the second act and not to change the scope of the borrowing act. thus just because the central excise act does not extend to the manufacture or production of alcoholic beverages meant for human consumption, it cannot be said that the terms 'manufacture' used in business auxiliary service would also not cover the process of making the said product, namely imfl.(emphasis supplied)17. in the aforesaid circular of 2006 it was mentioned that as alcohol beverages are not covered under the central excise law the production of beverages would not fall within the meaning of manufacture as conceptualized under clause (f) of section 2 of the central excise act. the board re-examined the matter in detail after receipt of the response and issued the circular f-no. 249/1/2006-cx.4, dated october 27, 2008 which relates to levy of service tax on production of alcoholic beverages on job work basis. the background of the circular reads as under:issues relating to taxable services provided during the course of production of alcoholic beverages (such as indian-made foreign liquors, branded country liquors and similar products) are matters of dispute for a considerable period. in this regard, a draft circular f. no. 249/1/2006-cx.9., dated november, 2006 (on applicability of service tax on taxable services provided in certain cases during the course of production of alcoholic beverages) was placed on the official website for eliciting responses from the stakeholders. the responses received from various stakeholders were carefully examined. it was noticed that in certain cases such alcoholic beverages are produced by the distillers who also own the brand names affixed on such beverages. such beverages are cleared on payment of state excise duty and there are no known disputes as regards the liability to pay service tax. in other cases, the owners of the brand name and the manufacturers may be two different entities and issues have been raised regarding provision of taxable services in such situations. there are several types of arrangements between the brand owners and the maker of the alcoholic beverages, which are as follows.18. thus, the circular clarified the position about the packaging of alcoholic beverages. the relevant part of the circular is as follows:3.1. under such arrangement the bo gets alcoholic beverages manufactured by the licencee/manufacturer, the latter holding the required state licences for manufacture of the alcoholic beverages. in trade, such licencees/manufacturers are called the contract bottling units or cbus. the cost of raw materials (and in some cases, even capital goods) and other expenses are either paid by the bo or reimbursed by the bo. statutory levies, (i.e., state excise duty) are also reimbursed to the cbu by the bo. the alcoholic beverages are sold by or as per the directions of the bo and profit or loss on account of manufacturing and sale of alcoholic beverages is entirely on account of bo, who thus holds the property, risk and reward of the products. the cbu receives consideration, (i.e., job charges) for undertaking the manufacturing activity on job work basis. there is no doubt that under such an arrangement, cbu is a service provider providing services to bo. a doubt has arisen, whether or not the cbu provides a taxable service namely, the business auxiliary service (bas) to bo. this taxable service includes 'any service provided or to be provided in relation to production or processing of goods for, or on behalf of the client'. this taxable service however, by definition excludes 'any activity that amounts to 'manufacture' within the meaning of clause (f) of section 2 of the central excise act, 1944 from its ambit'. the issue in dispute is whether such activity would be hit by the exclusion clause mentioned above.3.2 in the draft circular dated november, 2006, it was mentioned that as alcoholic beverages are not covered under central excise law, the production of beverages would not fall within the meaning of manufacture within the meaning of clause (f) of section 2 of the central excise act. thus, the exclusion clause would not apply to production of non-excisable goods, resulting in its coverage under bas. however, the matter was re-examined in detail by the board after receipt of the responses and it has now been concluded that the exclusion would be applicable in the instant case for the following reasons:(a) plain reading of section 3 of the central excise act, 1944 shows that for levy and collection of central excise duty, the following conditions must be satisfied:(i) the process undertaken must amount to manufacture as defined under section 2(f); and(ii) the result of such process should be emergence of excisable goods, which as per section 2(d) are the goods specified in the first and the second schedule of the central excise tariff act, 1985 as being subjected to duty of excise.therefore, 'manufacture' and 'excisable goods' are two independent concepts and that it is not necessary that a process amounting to manufacture within the meaning of section 2(f) should always result in emergence of an excisable goods and vice versa. whether a process would amount to manufacture within the meaning of section 2(f) has to be seen independently, based on the criteria evolved through various judgments of the apex court. there may be a case, when a process may amount to manufacture under section 2(f) but it may not result in emergence of an excisable product. if that be so, then the exclusion clause under bas, which refers only to the activity amounting to manufacture within the meaning of section 2(f), would still apply to such processes, whether or not the resultant product are excisable goods. such is the case of production of alcoholic beverages, which qualifies to be a process amounting to manufacture within the meaning of section 2(f), when read with the relevant judicial pronouncements, because a new product, with a distinct name, character or use ; and capable of being marketable, emerges ; and(b) in the instant case the exclusion provision under the definition of bas (under the finance act, 1994) makes a reference to a definition of the word 'manufacture' figuring under another act (i.e., the central excise act, 1944). it is a settled law that when a definition from an act is transposed into another act, it is as if the said definition in physically written into the borrowing act without any reference to the context of such definition in the act from which it is being borrowed. it is the words of that definition, which is imported into the borrowing act and not the scope of the first act and the context in which such definition is used in the first act. admittedly the scope of the two acts would be distinct and if the definition is borrowed from the first act into the second act having different scope, the same would get disturbed/distorted if the context and scope of the earlier act is also imported. thus, just because central excise act does not extend to the manufacture or production of alcoholic beverages meant for human consumption, it cannot be said that the term 'manufacture' used in bas would also not cover the process of making the said product, namely, alcoholic beverages.(emphasis supplied)19. if the basic aspect of manufacture as contained in section 2(f) of the act is appreciated, it would convey that the 'manufacture' would include 'any process incidental or ancillary with the completion of manufactured product'. the dictionary clause further expands the scope of manufacture to include certain goods which are specified in the section. the first limb of the inclusive definition of the 'manufacture' under section 2(f) of the act has a very wide connotation. as the definition clause lays down an inclusive facet, the term 'manufacture' has to be construed in a natural and plain manner and would include any process incidental or ancillary to the completion of a manufactured product. keeping in view the context in which the term 'manufacture' has been used, it would take in its fold the incidental or ancillary process in the manufacture or finishing of any manufactured product. it does not leave any room for doubt that an allied process should be integral and inextricable part of manufacture for completeness and presentability of the manufactured product. in collector, central excise, bombay v. s.d. fine chemicals pvt. ltd. : 1995(77)elt49(sc) , the apex court after analysing the various earlier decisions expressed the view that the definition of the word/expression 'manufacture' under section 2(f) of the act is not confined to the natural meaning of the said expression but is an extensive definition. it has been held therein that the certain processes which may not have otherwise amounted to manufacture are also brought within the ambit and purview of the said definition.20. in this context it is worth-noting section 65 (76b) of the finance act uses the words 'but it does not include'. thus, it is a definition which has the inclusive as well as exclusive facet. by virtue of the same it may include certain things and exclude others. it is a well-settled principle of law that a definition is not to be read in isolation and has to be read in the context of phrase which it defines, realising that the function of a definition is to give precision and certainty to the word or phrase which would otherwise be vague and uncertain. the said principle has been stated by the apex court in purshottam h. judye v. v.b. potdar : (1966)illj412sc and pioneer rubber plantation v. state of kerala : [1992]3scr972 .21. in this regard, we may profitably quote a passage from the principles of statutory interpretation by justice g. p. singh (11th edition, page 180) wherein the learned author analyzing the various decisions has expressed the view as under:a definition may be both inclusive and exclusive, i.e., it may include certain things and exclude others. limited exclusion of a thing may suggest that other categories of that thing which are not excluded fall within apparently wide or inclusive definition. but the exclusion clause may have to be given a liberal construction if the purpose behind it so requires.22. in view of the aforesaid principle and regard being had to the exclusionary facet in the finance act, though a limited one, it would exclude the manufacturing process as defined under section 2(f) of the' 1944 act.23. keeping in view the aforesaid dictionary clauses and circulars issued by the central board of excise and customs it is quite luminescent that word 'manufacture' has to be understood in a broader sense and not to be confined or restricted to the excisable product in the act. it would include all processes which amount to manufacture whether or not the final product is an excisable product.24. it will not be out of place to mention that section 65 (76b) while defining refers to the definition of 'manufacture' as contained in section 2(f) of the central excise act. thus, in a way it is referral legislation. in this context, we may refer with profit to the decision rendered in bajya v. smt. gopikabai : [1978]3scr561 wherein it has been held as under:27. broadly speaking, legislation by referential incorporation falls in two categories : first, where a statute by specific reference incorporates the provisions of another statute as of the time of adoption. second, where a statute incorporates by general reference the law concerning a particular subject, as a genus. in the case of the former, the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute. in the case of latter category, it may be presumed that the legislative intent was to include all the subsequent amendments also, made from time to time in the generic law on the subject adopted by general reference. this principle of construction of a reference statute has been neatly summed up by sutherland, thus:a statute which refers to the law of a subject generally adopts the law on the subject as of the time the law is invoked. this will include all the amendments and modifications of the law subsequent to the time the reference statute was enacted.(vide, sutherland's statutory construction, third, edition, article 5208, p. 5208) corpus juris secundum also enunciates the same principle in these terms:...where the reference in an adopting statute is to the law generally which governs the particular subject, and not to any specific statute or part thereof, ... the reference will be held to include the law as it stands at the time it is sought to be applied, with all the changes made from time to time, at least as far as the changes are consistent with the purpose of the adopting statute.25. in view of the aforesaid enunciation of law, the non-exclusive part in the finance act has to be in the context of section 2(f) of the 1944 act. at this stage it is apropos to note certain relevant aspects with regard to concept of country liquor supply of contract. such contracts are awarded only to distillers who are producers of rectified spirit. under the madhya pradesh country liquor rules, 1995 the distillers are given a cs-i licence to manufacture country spirit from rectified spirit by cleansing, colouring, flavouring, reducing, blending, etc., at the manufacturing warehouse. in the process of manufacturing of country spirit, the over proof spirit which is not potable is reduced to issuable strength, which is potable. colouring and flavouring agents are added at the time of maturation. thereafter the liquor is supplied in sealed bottles to the retail contractors. this is the process of treatment given to over proof spirit in order to render it fit for human consumption in the form of country liquor. if the process is analysed there cannot be any scintilla of doubt that the process involves the manufacturing one under the provisions of section 2(f) of the central excise act, 1944. as per the m. p. country spirits rules as well as clause 6 of the tender conditions it is mandatory for a distiller to supply country liquor in sealed bottles and not otherwise.26. it is urged by the learned counsel for the petitioners that the bottling and sealing done is an integral part of the manufacturing process of country liquor and no exclusive packaging service is provided to the retail contractors. the sealing charge which is being recovered from the retail contractors is, in fact the manufacturing cost and the charge is not for bottling of the country liquor but it includes the cost of the whole manufacturing of country liquor.27. in this context, we may refer with profit to the decision rendered in sir shadi lal distillery & chemical works v. state of u.p. : (1998)8scc428 wherein the apex court after referring to the decision rendered in khoday distilleries ltd. v. state of karnataka : air1996sc911 has expressed the view that bottling of liquor is an integral part of manufacture and supply thereof.28. in view of the aforesaid enunciation of law, whether an activity amounts to manufacture or not, it is incumbent to take note of any process which is incidental or ancillary to the completion of the final product whether the final product is excisable or not. this aspect has been clarified in the circular keeping in view the decision rendered by the apex court. it is worth noting that the definition of 'manufacture' as contained in section 2(14) of the 1915 act is an inclusive definition which covers every process whether incidental or artificial by which an intoxicant is produced or prepared. the same has been taken not of by the earlier division bench of this court in som distilleries' case [1997] 1 ilj 319 wherein it has been held as under:11. there is another aspect of the matter also that section 27a talks of duty and not the fee. it is a fee which the state is charging and not duty. entry 8 of list ii of the seventh schedule lays down that the state is competent to legislate on intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. in fact, the bottling is a part of manufacturing process. no liquor can be supplied without bottling. 'bottle' has already been defined under section 2(2) of the act of 1915. the state is competent to legislate in respect of rate of fees and how the bottling is to be done as the bottling is the part of manufacturing process.29. in vindhyachal distellaries pvt. ltd. , the division bench has placed heavy reliance on the tender notice and the conditions of tender notice. it has referred to separate charges which are to be recovered for bottling. in this regard we may refer to the decision rendered in arun electrics v. commissioner of sales tax [1966] 17 stc 576 (sc) wherein it has been held as follows : (page 577).the question whether in respect of a transaction sales tax is exigible may be determined only on the terms of the contract and not from the invoice issued by the person entitled to receive money under the contract.30. in bharat sanchar nigam ltd. v. union of india : [2006]282itr273(sc) , their lordships have expressed thus: (page 118 of 3 vst)42. all the clauses of article 366(29a) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the sale of goods act, 1930, are absent, within the ambit of purchase and sales for the purposes of levy of sales tax. to this extent only is the principle enunciated in gannon dunkerley ltd. : [1959]1scr379 . the amendment especially allows specific composite contracts, viz., works contracts [clause (b)]; hire purchase contracts [clause (c)], catering contracts [clause (e)] by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax.31. thereafter, their lordships proceeded to state as follows : (page 119 of 3 vst)of all the different kinds of composite transactions the drafters of the forty-sixth amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring within the fiction of a deemed sale. of these three, the first and third involve a kind of service and sale at the same time. apart from these two cases where splitting of the service and supply has been constitutionally permitted in clauses (b) and (f) of clause (29a) of article 366, there is no other service which has been permitted to be so split. for example, the clauses of article 366(29a) do not cover hospital services. therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases.32. recently, in imagic creative pvt. ltd. v. commissioner of commercial taxes : 2008[9]s.t.r.337 their lordships opined thus : (page 384 of vst)if the submission of mr. hegde is accepted in its entirety, whereas on the one hand, the central government would be deprived of obtaining any tax whatsoever under the finance act, 1994, it is possible to arrive at a conclusion that no tax at all would be payable as the tax has been held to be an indivisible one. a distinction must be borne in mind between an indivisible contract and a composite contract. if in a contract, an element to provide service is contained, the purport and object for which the constitution had to be amended and clause (29a) had to be inserted in article 366, must be kept in mind.33. in view of the aforesaid authorities, the closer scrutiny of the terms and conditions of tender notice relating to price and invoice by the division bench in vindhyachal distellaries pvt. ltd. for the purpose of excluding packaging of liquor from the spectrum of manufacturing process is not correct.34. at this stage, for the purpose of binding nature of board's circulars, we may refer with profit to the decision rendered in r. & b. falcon (a) pty. ltd. v. commissioner of income-tax : [2008]301itr309(sc) , wherein it has been held as follows : (page 322 of itr)35. the central board of direct taxes has the requisite jurisdiction to interpret the provisions of the income-tax act. the interpretation of the central board of direct taxes being in the realm of executive construction, should ordinarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts. the reason for giving effect to such executive construction is not only the same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in a certain situation a representation made by an authority like a minister presenting the bill before parliament may also be found bound thereby.35. in commissioner of central excise, bolpur v. ratan melting & wire industries [2008] 13 scc 1, the constitution bench has held as under:7. circulars and instructions issued by the board are no doubt binding in law on the authorities under the respective statutes, but when the supreme court or the high court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this court or the high court. so far as the clarifications/circulars issued by the central government and of the state government are concerned they represent merely their understanding of the statutory provisions. they are not binding upon the court. it is for the court to declare what the particular provision of statute says and it is not for the executive. looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.36. in the case at hand, the circular issued by the central board of excise and customs is in consonance with the statutory provisions as well as the law laid down by the apex court in sir shadi lal distillery & chemical works : (1998)8scc428 .37. though we have analysed and stated that we are unable to concur with the view taken by the division bench in vindhyachal distellaries pvt. ltd. we think it condign to enumerate the reasons therefor in seriatim:(i) section 65 (76b) of the finance act by referral legislation excludes the manufacturing process as defined under section 2(f) of the 1944 act and the said provision is not to be read in a composite and cumulative manner, inasmuch as each clause in the said provision is independent because of the language employed therein.(ii) the manufacturing process does not necessarily mean it has to be excisable goods but would include any process which is incidental or ancillary to the completion of a manufactured product.(iii) the definition under section 65 (76b) of the act read with definition section 2(f) of the 1944 act does not exclude the concept of manufacturing process as defined under section 2(14) of the 1915 act which is an inclusive definition that includes every process whether natural or artificial.(iv) the dissection of the tender conditions especially the invoices and pricing by the division bench for the purpose of determining the manufacturing process is incorrect in view of the decisions rendered in arun electrics [1966] 17 stc 576 (sc), bharat sanchar nigam ltd. : [2006]282itr273(sc) and imagic creative pvt. ltd. : 2008[9]s.t.r.337 .(v) the view expressed by the earlier division bench in som distilleries and breweries pvt. ltd. [1997] 1 ilj 319 on the basis of scrutiny of anatomy of the various provisions of the 1915 act that bottling is a part of the manufacturing process could not have been distinguished on the ground that the decision was not with respect to the activity of packaging as enshrined under section 65 (76b) of the finance act and the definition under section 2(f) of the central excise act inasmuch as the said definition by its import excludes the manufacturing process under the central excise act from the net of service tax.(vi) the circular f. no. 249/l/2006-cx, dated october 27, 2008 issued by the central board of excise and customs clarifies the position that the term 'manufacturing process' as far as bottling is concerned, has to be understood in the context of the decision of the apex court and keeping that in view, has taken it out of net of service tax and the said circular is in consonance with the decision rendered by the apex court in sir shadi lal distillery & chemical works : (1998)8scc428 .(vii) the process of manufacture as defined under section 2(14) of the 1915 act falls within the ambit and sweep of section 2(f)(i) of the central excise act, 1944 and, therefore, there can be no levy of service tax on manufacture in view of the clear postulate under section 65 (76b) of the finance act, 2005. to elaborate : the fundamental concept of manufacture as engrafted under section 2(14) of the 1915 act cannot be regarded as alien to the definition of 'manufacture' under section 2(f)(i) of the central excise act as has been held by the division bench in vindhyachal distellaries pvt. ltd. .(viii) the analysis that the bottling of liquor can be independent is not correct, as the liquor cannot be sold without bottling as there is statutory stipulation that the liquor has to be sold in bottles. to further clarify, the container becomes a part of manufacturing process, and that has been so held in som distilleries and breweries pvt. ltd. [1997] 1 ilj 319.38. in view of the aforesaid, we answer the reference on following terms:the decision rendered in vindhyachal distellaries pvt. ltd. does not state the law correctly inasmuch as it has expressed the opinion that packaging and bottling of liquor are not the part of manufacturing process and hence, liable to service tax and we uphold the view taken in som distilleries [1997] 1 ilj 319 and, therefore, rule that packaging and bottling of liquor come within the ambit and sweep of 'manufacture' within the meaning of clause (f) of section 2 of the central excise act, 1944 in view of the definition contained in section 65 (76b) of the finance act especially keeping in view the exclusionary facet and further regard being had to the circular issued by central board of excise and customs.let the matter be listed before the appropriate division bench for final disposal.

Judgment:
ORDER

Dipak Misra, J.

1. In this batch of writ petitions, the constitutional validity of Section 65(76b) of the Finance Act, 1994 (for short, 'the Act') as amended by the Finance Act, 2005 was challenged primarily and principally on the ground that there is lack of legislative competence on the part of the concerned Legislature to bring in such a legislation and further, assuming the legislation meets the test of legislative competence, it is violative of Article 14 of the Constitution of India. The aforesaid writ petitions were listed along with W. A. No. 1524 of 2007.

2. In the course of hearing of the writ appeal, on behalf of the appellant therein, it was contended that the decision rendered by the Division Bench in Vindhyachal Distellaries Pvt. Ltd. v. State of M.P. [2007] 7 VST 197 (MP) has not appropriately considered the decision rendered in Som Distilleries and Breweries Pvt. Ltd. v. State of M.P. [1997] 1 ILJ 319 and various other aspects which deserve consideration. The Division Bench hearing the writ appeal thought it apposite to refer the matter to a larger bench. The question that has been referred reads as follows:

Whether bottling of liquor amounts to manufacture of liquor or only packaging so as to attract the service tax?

3. It is worth-noting that W. A. No. 1524 of 2007 was held to be not maintainable by the Full Bench and in that backdrop, the reference was not answered. These writ petitions being connected with the writ appeal were heard by the Full Bench.

4. Mr. Sumit Nema, learned Counsel appearing for the petitioners, submitted that by abundant caution, he had challenged the constitutional validity of the provision but on a keener scrutiny, it is felt by him that the cause of justice would be best subserved if only the apposite interpretative process is adopted to scan the anatomy of the provisions, to arrive at the conclusion whether the bottling of liquor would invite the impost of service tax as envisaged under Section 65 (76b) of the Act.

5. Keeping in view the aforesaid limited submission of Mr. Nema, we will not dwell upon the constitutional validity but only advert ourselves to the question whether the service tax as defined under the Act in the amending provision takes in its net the bottling of liquor.

6. To appreciate the factual scenario in proper perspective we shall refer to the facts in W. P. No. 700 of 2008 in brief. The petitioner purchases bottles of country spirit from the licensees who are engaged in the manufacture and supply of country liquor in sealed bottles pursuant to the licence issued by the competent authority of the State Government under the provisions of the M. P. Excise Act, 1915 (for short, 'the 1915 Act') and the Rules framed therein. The rectified spirit is manufactured by the process of distillation in the distillery, the rectified spirit is blended in the warehouses, bottled, sealed, labelled and is supplied to the retail contractors. Bottling licence is issued in form CS 1 appended in the M. P. Country Spirit Rules, 1995 (hereinafter referred to as, 'the 1995 Rules'). The petitioner was granted a licence in respect of the excise year 2005-06 for supply in respect of the areas mentioned therein. The said licence was issued pursuant to the tender notice dated March 22, 2005 issued by the Excise Commissioner and the said tender notice described 'tender notice for the manufacture and supply of country spirit in sealed bottles in various districts of the State'. Reliance has been placed on Clause (6) of the tender notice to highlight that the entire activity of manufacture, bottling and supply is a composite one. In the 1915 Act as well as on the conditions of the tender, a licensee is under obligation to supply liquor in the sealed bottles.

7. According to the writ petitioner, the process of manufacturing involves various stages, viz., manufacture of rectified spirit at distilleries ; transportation of rectified spirit from distilleries to manufacturing warehouses ; manufacturing activity (blending) to make rectified spirit fit for human consumption; bottling, sealing, packaging of country spirit. It is contended that after the rectified spirit is rendered fit for human consumption the same is filled in bottles or some other packing mode as specified by the Excise Commissioner under the supervision of the officer in-charge of the warehouses and sealing of the bottles is carried out as per specification and labels are affixed on each bottle and thereafter on demand of retail contractors and upon proof of payment into treasury of the issue price recoverable for it, the CS 1 licence issues bottles of country spirit to the retail contractor. The 1915 Act contains provisions with regard to the manufacture, supply and sale of liquor. Chapter IV of the 1915 Act deals with the manufacture, possession and sale of liquor. Section 13 of the Act creates a bar on manufacture and collection of intoxicant except under the authority and subject to the terms and conditions of the licence in that regard. Section 13(b) prohibits bottling of liquor for sale. Section 15 provides for payment of duty for removal of liquor from the warehouses, distillery or brewery. Section 16 restricts possession of intoxicant beyond the prescribed limit and Section 17 deals with sale of intoxicants with the stipulation that no intoxicant shall be sold except under the authority and subject to the terms and conditions of a licence in that regard. Reference has been made to the 1995 Rules in detail to highlight how the said rules especially, rules 3 and 4, prescribe the manner of supply of liquor in sealed bottles and, therefore, the entire process of bottling is a part of the process of manufacturing which is performed under the supervision and control of the excise authorities.

8. It is contended that if Section 65 (76b) of the Finance Act and Section 2(f) of the Central Excise Act, 1944 (for short, 'the 1944 Act') are read in a purposive manner, it would be clear as crystal that service tax as provided under the Finance Act would not be leviable on the manufacturing activity of country liquor, for the bottling is an integral and essential part of the process of manufacturing. Though various other averments have been made as regards the constitutional validity of the provision, yet the same having been abandoned, it is unnecessary to refer to them.

9. Mr. Shekhar Sharma, learned Counsel appearing for the respondents in his turn, on the basis of abandonment of prayer pertaining to constitutional validity, has placed heavy reliance on the decision rendered in Vindhyachal Distellaries Pvt. Ltd. [2007] 7 VST 197 (MP) and put forth that the decision rendered therein covers the field in entirety and the same being in total consonance with the provisions of the 1944 Act and the Finance Act and the interpretation placed being absolutely impeccable, the bottling of liquor, by no stretch of imagination, can be regarded as a part of manufacturing process and, therefore, levy of service tax is totally justified.

10. Before we advert to the relevant provisions, we think it apt to dwell upon what has been held in Vindhyachal Distellaries Pvt. Ltd. . In the said decision the Division Bench posed the question whether service tax on packaging, i.e., bottling and labelling of liquor can be collected from the distillers and whether they can pass on this liability to the contractors obtaining the supplies from them. The Bench referred to Section 65 (76b) of the Act and the provisions under the 1995 Rules and Section 2(d) of the 1944 Act which defines 'excisable goods', the conditions of the tender, especially condition No. 6 and the transactions as per tender notice and relied upon the decision rendered in Tamil Nadu Kalyana Mandapam Assn. v. Union of India : [2004]267ITR9(SC) wherein imposition of service tax on mandap keepers was upheld on the foundation that it is was permissible to lift the service tax on the catering services provided by the mandap keepers and the contention that it did tantamount to tax on land was rejected, and further adverted to the concept 'in relation to' as has been dealt with in the case of Tamil Nadu Kalyana Mandapam Assn. : [2004]267ITR9(SC) and thereafter expressed the view as under : (page 211 of 7 VST)

It is clear from the transaction that only the service was to be provided for the purpose of packaging, which was controlled under the condition of tender notice and separate charges were paid for bottling, labelling and sealing, which were not forming part of the price of the country spirit. For country spirit separate bills were raised and for the aforesaid part of packaging service charges were prescribed and there were service obligations to be carried out in the form of bottling while undertaking the packaging activity. There was obligation to reuse the bottle offered by the contractors. The entire mechanism leaves no room for any doubt that it was packaging activity, which was clearly a service activity under Section 65 (76b) and not process of manufacture as defined in Section 2(f) of the Central Excise Act.

It may also be noted that in Section 2(d) of the Central Excise Act 'excisable goods' means those goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt. The Chapter 22 of the Central Excise Tariff Act, 1985 covers beverages, spirits and vinegar. However, as per the chapter note (4) this chapter does not cover alcoholic liquors for human consumption. Therefore, the activity of various distillers does not come under the purview of 'manufacture' as defined in Section 2(f) of the Central Excise Act, 1944. The bottled country liquor or its packing or re-packing activity has not been mentioned/specified in Central Excise Tariff Act. Even if we consider the manufacturing activity, it is clear that manufacturing activity is de hors of event of its liability for the Central excise as defined in Section 2(f). In our opinion, packaging cannot be said to be part of process of manufacture as defined in Section 2(f) in the facts and circumstances of the instant case, it is clearly a service provided as per terms of tender.

11. After so stating, the Bench proceeded to hold as under : (page 211 of VST).Thus it is a service part of the activity which is being taxed, which is independent of the process of manufacture and cannot be said to be integral part of process of manufacture as excluded in Section 65(76)(b) inserted by the Finance Act, 2005 read with Section 2(f) of the Central Excise Act. The apex court in Collector, Central Excise, Bombay v. S.D. Fine Chemicals Pvt. Ltd. : 1995(77)ELT49(SC) has laid down that whether a particular process is covered by 'manufacture' as defined in Section 2(f) is a question of fact, to be determined in the facts of each case. In Collector of Central Excise, Hyderabad v. Jayant Oil Mills Pvt. Ltd. : 1989(40)ELT287(SC) , the apex court held that all processes do not constitute manufacture. In our opinion, if merely by providing service for bottling a new commodity, does not come into being new article, it is clearly a service provided. . : 1988(35)ELT6(SC) , it is held that by conversion of timber logs into sawn timber, no new produce emerged by sawing of timber, therefore, higher excise duty on sawn timber was not leviable.

12. After so holding, the Division Bench referred to the decision rendered in Som Distilleries and Breweries Pvt. Ltd. [1997] 1 ILJ 319 and distinguished the same by observing as under : (page 212 of 7 VST).The decision is of no assistance to the question involved in the present case. It was rendered in the context of M.P. Excise Act, 1915 for imposition of duty and there was no discrimination made while making the classification. Decision was not in context of Central Excise Act. The decision was not with respect to the activity of packaging under Section 65(76)(b) and the definition under Section 2(f). It was also laid down that bottling fee, which is charged, is not excise duty, though it is an excise revenue for the State and it was within the competence of the State entry under the entry 66 of the List II and 8 of the List II of the Schedule of the Constitution. We are concerned about the service tax in the instant case, inserted by the Finance Act, 2005. The observations were made by the division Bench in the context of classification which was made under the M. P. Excise Act, 1915 where definition of 'manufacture' is different and whether any service was rendered in the process was not the question agitated or decided. The decision is distinguishable and has no application to the controversy involved in the present petition.

13. Eventually, the Bench expressed the opinion that service tax being an indirect tax can be passed on to the service receivers.

14. It is submitted by Mr. Sumit Nema, learned Counsel for the petitioners that the interpretation placed by the Division Bench is not correct inasmuch as the language employed in the Finance Act has not been appositely appreciated. It is worth-noting that on June 16, 2005 Section 65 (76b) of the Finance Act was amended and packaging activity was brought within the purview and ambit of service tax. The said definition reads as under:

65. Definitions.-In this Chapter, unless the context otherwise requires:(76b) 'packaging activity' means packaging of goods including pouch-filling, bottling, labelling or imprinting of the package, but does not include any packaging activity that amounts to 'manufacture' within the meaning of Clause (f) of Section 2 of the Central Excise Act, 1944 (No. 1 of 1944).

15. On a scrutiny of the said definition, it is quite clear that packaging activity means packaging of goods including pouch-filling, bottling, labelling or imprinting of the package but the definition does not stop there, as the provision expressly shows, it does not include any packaging activity that amounts to manufacture within the meaning of Clause (f) of Section 2 of the 1944 Act. Section 2(f) of the 1944 Act reads as follows:

2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,:

(a) ...

(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 relation to the goods specified in the Third Schedule involves packing or repacking of such goods in a unit container or labelling or re-labelling 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.

16. The learned Counsel for the petitioners has laid immense emphasis on Sub-clause (i) of Clause 2(f) which deals with 'incidental or ancillary to the completion of a manufactured product'. The learned Counsel submitted that if bottling is treated as incidental or ancillary to the completion of a manufactured product, i.e., the country spirit, indubitably, would come within the sweep of the definition and get out of the net of packaging activity as defined under Section 65 (76b) coming within the non-inclusive facet. The learned Counsel has submitted that the definition is absolutely clear and there is no ambiguity. In this regard it would be fruitful to refer to two circulars, issued by the Central Board of Excise and Customs one bearing No. 249/1/2006 dated November, 2006 and another being Circular F-No. 249/1/2006 - CX.4, dated October 27, 2008. The Board was dealing with the similar definition in the context of business auxiliary service in the Finance Act, 1994 where similar exclusionary clause is stipulated in the definition clause. The relevant extract of 2006 circular is as under:

The activities undertaken by the CBUs is appropriately classifiable under Clause (v) of the definition of 'business auxiliary service' which reads as under:

(v) production or processing of goods for, on or behalf of the client ; This taxable service, however, excludes from its purview 'any activity' that amounts to 'manufacture' within the meaning of Clause (f) of Section 2 of the Central Excise Act, 1944'. In other words even if a service provider produces or processes goods on behalf of the client ; such activity would go out of the purview of the said taxable service, if the same amounts to manufacture as under Central Excise law. This poses a secondary or a related question because of the fact as per the entry No. 92C in List I of the Seventh Schedule to the Constitution of India, the Union Excise Duty is not extendable to the manufacture of potable liquor or alcoholic beverages for human consumption. Such being the case, a question arises as to whether the manufacture of potable of IMFL should be excluded from the purview of business auxiliary service. There is no doubt that the process of making IMFL from its raw material involves change in name, character and use that have been laid down as criterion for a process being amount to manufacture by the judicial pronouncement of the apex court. But the question remains that irrespective of such laid down principles, the process of making IMFL would remain within the purview of Section 2(f) of a Union Act which does not extend to the final product in question, namely, IMFL. On this subject the opinion of the Ministry of Law is that 'even though the definition under the Central Excise Act are for the purpose of that Act, yet by referential legislation, a few of them have been borrowed by reference to the first Act'. In other words when a definition from an Act is transposed unto another Act, it is the scope of that definition which is imported into the borrowing Act and not the scope of the first Act and the context in which such definition is used in the first Act. Admittedly the scope of the two Acts would be distinct and if the definition is borrowed from the first Act into the second Act having different scope, the same would get disturbed/distorted if the context and scope of the earlier Act is also imported. This is primarily a substitute to writing the entire defining terms in the second Act and not to change the scope of the borrowing Act. Thus just because the Central Excise Act does not extend to the manufacture or production of alcoholic beverages meant for human consumption, it cannot be said that the terms 'manufacture' used in business auxiliary service would also not cover the process of making the said product, namely IMFL.

(Emphasis supplied)

17. In the aforesaid circular of 2006 it was mentioned that as alcohol beverages are not covered under the Central Excise law the production of beverages would not fall within the meaning of manufacture as conceptualized under Clause (f) of Section 2 of the Central Excise Act. The Board re-examined the matter in detail after receipt of the response and issued the Circular F-No. 249/1/2006-CX.4, dated October 27, 2008 which relates to levy of service tax on production of alcoholic beverages on job work basis. The background of the circular reads as under:

Issues relating to taxable services provided during the course of production of alcoholic beverages (such as Indian-made foreign liquors, branded country liquors and similar products) are matters of dispute for a considerable period. In this regard, a draft Circular F. No. 249/1/2006-CX.9., dated November, 2006 (on applicability of service tax on taxable services provided in certain cases during the course of production of alcoholic beverages) was placed on the official website for eliciting responses from the stakeholders. The responses received from various stakeholders were carefully examined. It was noticed that in certain cases such alcoholic beverages are produced by the distillers who also own the brand names affixed on such beverages. Such beverages are cleared on payment of State excise duty and there are no known disputes as regards the liability to pay service tax. In other cases, the owners of the brand name and the manufacturers may be two different entities and issues have been raised regarding provision of taxable services in such situations. There are several types of arrangements between the brand owners and the maker of the alcoholic beverages, which are as follows.

18. Thus, the circular clarified the position about the packaging of alcoholic beverages. The relevant part of the circular is as follows:

3.1. Under such arrangement the BO gets alcoholic beverages manufactured by the licencee/manufacturer, the latter holding the required State licences for manufacture of the alcoholic beverages. In trade, such licencees/manufacturers are called the Contract Bottling Units or CBUs. The cost of raw materials (and in some cases, even capital goods) and other expenses are either paid by the BO or reimbursed by the BO. Statutory levies, (i.e., State excise duty) are also reimbursed to the CBU by the BO. The alcoholic beverages are sold by or as per the directions of the BO and profit or loss on account of manufacturing and sale of alcoholic beverages is entirely on account of BO, who thus holds the property, risk and reward of the products. The CBU receives consideration, (i.e., job charges) for undertaking the manufacturing activity on job work basis. There is no doubt that under such an arrangement, CBU is a service provider providing services to BO. A doubt has arisen, whether or not the CBU provides a taxable service namely, the Business Auxiliary Service (BAS) to BO. This taxable service includes 'any service provided or to be provided in relation to production or processing of goods for, or on behalf of the client'. This taxable service however, by definition excludes 'any activity that amounts to 'manufacture' within the meaning of Clause (f) of Section 2 of the Central Excise Act, 1944 from its ambit'. The issue in dispute is whether such activity would be hit by the exclusion clause mentioned above.

3.2 In the draft circular dated November, 2006, it was mentioned that as alcoholic beverages are not covered under Central excise law, the production of beverages would not fall within the meaning of manufacture within the meaning of Clause (f) of Section 2 of the Central Excise Act. Thus, the exclusion clause would not apply to production of non-excisable goods, resulting in its coverage under BAS. However, the matter was re-examined in detail by the Board after receipt of the responses and it has now been concluded that the exclusion would be applicable in the instant case for the following reasons:

(a) Plain reading of Section 3 of the Central Excise Act, 1944 shows that for levy and collection of Central excise duty, the following conditions must be satisfied:

(i) The process undertaken must amount to manufacture as defined under Section 2(f); and

(ii) The result of such process should be emergence of excisable goods, which as per Section 2(d) are the goods specified in the First and the Second Schedule of the Central Excise Tariff Act, 1985 as being subjected to duty of excise.

Therefore, 'manufacture' and 'excisable goods' are two independent concepts and that it is not necessary that a process amounting to manufacture within the meaning of Section 2(f) should always result in emergence of an excisable goods and vice versa. Whether a process would amount to manufacture within the meaning of Section 2(f) has to be seen independently, based on the criteria evolved through various judgments of the apex court. There may be a case, when a process may amount to manufacture under Section 2(f) but it may not result in emergence of an excisable product. If that be so, then the exclusion clause under BAS, which refers only to the activity amounting to manufacture within the meaning of Section 2(f), would still apply to such processes, whether or not the resultant product are excisable goods. Such is the case of production of alcoholic beverages, which qualifies to be a process amounting to manufacture within the meaning of Section 2(f), when read with the relevant judicial pronouncements, because a new product, with a distinct name, character or use ; and capable of being marketable, emerges ; and

(b) In the instant case the exclusion provision under the definition of BAS (under the Finance Act, 1994) makes a reference to a definition of the word 'manufacture' figuring under another Act (i.e., the Central Excise Act, 1944). It is a settled law that when a definition from an Act is transposed into another Act, it is as if the said definition in physically written into the borrowing Act without any reference to the context of such definition in the Act from which it is being borrowed. It is the words of that definition, which is imported into the borrowing Act and not the scope of the first Act and the context in which such definition is used in the first Act. Admittedly the scope of the two Acts would be distinct and if the definition is borrowed from the first Act into the second Act having different scope, the same would get disturbed/distorted if the context and scope of the earlier Act is also imported. Thus, just because Central Excise Act does not extend to the manufacture or production of alcoholic beverages meant for human consumption, it cannot be said that the term 'manufacture' used in BAS would also not cover the process of making the said product, namely, alcoholic beverages.

(emphasis supplied)

19. If the basic aspect of manufacture as contained in Section 2(f) of the Act is appreciated, it would convey that the 'manufacture' would include 'any process incidental or ancillary with the completion of manufactured product'. The dictionary clause further expands the scope of manufacture to include certain goods which are specified in the section. The first limb of the inclusive definition of the 'manufacture' under Section 2(f) of the Act has a very wide connotation. As the definition clause lays down an inclusive facet, the term 'manufacture' has to be construed in a natural and plain manner and would include any process incidental or ancillary to the completion of a manufactured product. Keeping in view the context in which the term 'manufacture' has been used, it would take in its fold the incidental or ancillary process in the manufacture or finishing of any manufactured product. It does not leave any room for doubt that an allied process should be integral and inextricable part of manufacture for completeness and presentability of the manufactured product. In Collector, Central Excise, Bombay v. S.D. Fine Chemicals Pvt. Ltd. : 1995(77)ELT49(SC) , the apex court after analysing the various earlier decisions expressed the view that the definition of the word/expression 'manufacture' under Section 2(f) of the Act is not confined to the natural meaning of the said expression but is an extensive definition. It has been held therein that the certain processes which may not have otherwise amounted to manufacture are also brought within the ambit and purview of the said definition.

20. In this context it is worth-noting Section 65 (76b) of the Finance Act uses the words 'but it does not include'. Thus, it is a definition which has the inclusive as well as exclusive facet. By virtue of the same it may include certain things and exclude others. It is a well-settled principle of law that a definition is not to be read in isolation and has to be read in the context of phrase which it defines, realising that the function of a definition is to give precision and certainty to the word or phrase which would otherwise be vague and uncertain. The said principle has been stated by the apex court in Purshottam H. Judye v. V.B. Potdar : (1966)ILLJ412SC and Pioneer Rubber Plantation v. State of Kerala : [1992]3SCR972 .

21. In this regard, we may profitably quote a passage from the Principles of Statutory Interpretation by Justice G. P. Singh (11th Edition, page 180) wherein the learned author analyzing the various decisions has expressed the view as under:

A definition may be both inclusive and exclusive, i.e., it may include certain things and exclude others. Limited exclusion of a thing may suggest that other categories of that thing which are not excluded fall within apparently wide or inclusive definition. But the exclusion clause may have to be given a liberal construction if the purpose behind it so requires.

22. In view of the aforesaid principle and regard being had to the exclusionary facet in the Finance Act, though a limited one, it would exclude the manufacturing process as defined under Section 2(f) of the' 1944 Act.

23. Keeping in view the aforesaid dictionary clauses and circulars issued by the Central Board of Excise and Customs it is quite luminescent that word 'manufacture' has to be understood in a broader sense and not to be confined or restricted to the excisable product in the Act. It would include all processes which amount to manufacture whether or not the final product is an excisable product.

24. It will not be out of place to mention that Section 65 (76b) while defining refers to the definition of 'manufacture' as contained in Section 2(f) of the Central Excise Act. Thus, in a way it is referral legislation. In this context, we may refer with profit to the decision rendered in Bajya v. Smt. Gopikabai : [1978]3SCR561 wherein it has been held as under:

27. Broadly speaking, legislation by referential incorporation falls in two categories : First, where a statute by specific reference incorporates the provisions of another statute as of the time of adoption. Second, where a statute incorporates by general reference the law concerning a particular subject, as a genus. In the case of the former, the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute. In the case of latter category, it may be presumed that the legislative intent was to include all the subsequent amendments also, made from time to time in the generic law on the subject adopted by general reference. This principle of construction of a reference statute has been neatly summed up by Sutherland, thus:

A statute which refers to the law of a subject generally adopts the law on the subject as of the time the law is invoked. This will include all the amendments and modifications of the law subsequent to the time the reference statute was enacted.(Vide, Sutherland's Statutory Construction, Third, Edition, article 5208, p. 5208) Corpus Juris Secundum also enunciates the same principle in these terms:...Where the reference in an adopting statute is to the law generally which governs the particular subject, and not to any specific statute or part thereof, ... the reference will be held to include the law as it stands at the time it is sought to be applied, with all the changes made from time to time, at least as far as the changes are consistent with the purpose of the adopting statute.

25. In view of the aforesaid enunciation of law, the non-exclusive part in the Finance Act has to be in the context of Section 2(f) of the 1944 Act. At this stage it is apropos to note certain relevant aspects with regard to concept of country liquor supply of contract. Such contracts are awarded only to distillers who are producers of rectified spirit. Under the Madhya Pradesh Country Liquor Rules, 1995 the distillers are given a CS-I licence to manufacture country spirit from rectified spirit by cleansing, colouring, flavouring, reducing, blending, etc., at the manufacturing warehouse. In the process of manufacturing of country spirit, the over proof spirit which is not potable is reduced to issuable strength, which is potable. Colouring and flavouring agents are added at the time of maturation. Thereafter the liquor is supplied in sealed bottles to the retail contractors. This is the process of treatment given to over proof spirit in order to render it fit for human consumption in the form of country liquor. If the process is analysed there cannot be any scintilla of doubt that the process involves the manufacturing one under the provisions of Section 2(f) of the Central Excise Act, 1944. As per the M. P. Country Spirits Rules as well as Clause 6 of the Tender Conditions it is mandatory for a distiller to supply country liquor in sealed bottles and not otherwise.

26. It is urged by the learned Counsel for the petitioners that the bottling and sealing done is an integral part of the manufacturing process of country liquor and no exclusive packaging service is provided to the retail contractors. The sealing charge which is being recovered from the retail contractors is, in fact the manufacturing cost and the charge is not for bottling of the country liquor but it includes the cost of the whole manufacturing of country liquor.

27. In this context, we may refer with profit to the decision rendered in Sir Shadi Lal Distillery & Chemical Works v. State of U.P. : (1998)8SCC428 wherein the apex court after referring to the decision rendered in Khoday Distilleries Ltd. v. State of Karnataka : AIR1996SC911 has expressed the view that bottling of liquor is an integral part of manufacture and supply thereof.

28. In view of the aforesaid enunciation of law, whether an activity amounts to manufacture or not, it is incumbent to take note of any process which is incidental or ancillary to the completion of the final product whether the final product is excisable or not. This aspect has been clarified in the circular keeping in view the decision rendered by the apex court. It is worth noting that the definition of 'manufacture' as contained in Section 2(14) of the 1915 Act is an inclusive definition which covers every process whether incidental or artificial by which an intoxicant is produced or prepared. The same has been taken not of by the earlier Division Bench of this Court in Som Distilleries' case [1997] 1 ILJ 319 wherein it has been held as under:

11. There is another aspect of the matter also that Section 27A talks of duty and not the fee. It is a fee which the State is charging and not duty. Entry 8 of List II of the Seventh Schedule lays down that the State is competent to legislate on intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. In fact, the bottling is a part of manufacturing process. No liquor can be supplied without bottling. 'Bottle' has already been defined under Section 2(2) of the Act of 1915. The State is competent to legislate in respect of rate of fees and how the bottling is to be done as the bottling is the part of manufacturing process.

29. In Vindhyachal Distellaries Pvt. Ltd. , the Division Bench has placed heavy reliance on the tender notice and the conditions of tender notice. It has referred to separate charges which are to be recovered for bottling. In this regard we may refer to the decision rendered in Arun Electrics v. Commissioner of Sales Tax [1966] 17 STC 576 (SC) wherein it has been held as follows : (page 577).The question whether in respect of a transaction sales tax is exigible may be determined only on the terms of the contract and not from the invoice issued by the person entitled to receive money under the contract.

30. In Bharat Sanchar Nigam Ltd. v. Union of India : [2006]282ITR273(SC) , their Lordships have expressed thus: (page 118 of 3 VST)

42. All the clauses of Article 366(29A) serve to bring transactions where one or more of the essential ingredients of a sale as defined in the Sale of Goods Act, 1930, are absent, within the ambit of purchase and sales for the purposes of levy of sales tax. To this extent only is the principle enunciated in Gannon Dunkerley Ltd. : [1959]1SCR379 . The amendment especially allows specific composite contracts, viz., works contracts [Clause (b)]; hire purchase contracts [clause (c)], catering contracts [clause (e)] by legal fiction to be divisible contracts where the sale element could be isolated and be subjected to sales tax.

31. Thereafter, their Lordships proceeded to state as follows : (page 119 of 3 VST)

Of all the different kinds of composite transactions the drafters of the Forty-sixth Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been constitutionally permitted in Clauses (b) and (f) of Clause (29A) of Article 366, there is no other service which has been permitted to be so split. For example, the clauses of Article 366(29A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases.

32. Recently, in Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes : 2008[9]S.T.R.337 their Lordships opined thus : (page 384 of VST)

If the submission of Mr. Hegde is accepted in its entirety, whereas on the one hand, the Central Government would be deprived of obtaining any tax whatsoever under the Finance Act, 1994, it is possible to arrive at a conclusion that no tax at all would be payable as the tax has been held to be an indivisible one. A distinction must be borne in mind between an indivisible contract and a composite contract. If in a contract, an element to provide service is contained, the purport and object for which the Constitution had to be amended and Clause (29A) had to be inserted in Article 366, must be kept in mind.

33. In view of the aforesaid authorities, the closer scrutiny of the terms and conditions of tender notice relating to price and invoice by the Division Bench in Vindhyachal Distellaries Pvt. Ltd. for the purpose of excluding packaging of liquor from the spectrum of manufacturing process is not correct.

34. At this stage, for the purpose of binding nature of Board's circulars, we may refer with profit to the decision rendered in R. & B. Falcon (A) Pty. Ltd. v. Commissioner of Income-tax : [2008]301ITR309(SC) , wherein it has been held as follows : (page 322 of ITR)

35. The Central Board of Direct Taxes has the requisite jurisdiction to interpret the provisions of the Income-tax Act. The interpretation of the Central Board of Direct Taxes being in the realm of executive construction, should ordinarily be held to be binding, save and except where it violates any provisions of law or is contrary to any judgment rendered by the courts. The reason for giving effect to such executive construction is not only the same as contemporaneous which would come within the purview of the maxim temporania caste pesto, even in a certain situation a representation made by an authority like a Minister presenting the bill before Parliament may also be found bound thereby.

35. In Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries [2008] 13 SCC 1, the Constitution Bench has held as under:

7. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the court to declare what the particular provision of statute says and it is not for the executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.

36. In the case at hand, the circular issued by the Central Board of Excise and Customs is in consonance with the statutory provisions as well as the law laid down by the apex court in Sir Shadi Lal Distillery & Chemical Works : (1998)8SCC428 .

37. Though we have analysed and stated that we are unable to concur with the view taken by the Division Bench in Vindhyachal Distellaries Pvt. Ltd. we think it condign to enumerate the reasons therefor in seriatim:

(i) Section 65 (76b) of the Finance Act by referral legislation excludes the manufacturing process as defined under Section 2(f) of the 1944 Act and the said provision is not to be read in a composite and cumulative manner, inasmuch as each clause in the said provision is independent because of the language employed therein.

(ii) The manufacturing process does not necessarily mean it has to be excisable goods but would include any process which is incidental or ancillary to the completion of a manufactured product.

(iii) The definition under Section 65 (76b) of the Act read with definition Section 2(f) of the 1944 Act does not exclude the concept of manufacturing process as defined under Section 2(14) of the 1915 Act which is an inclusive definition that includes every process whether natural or artificial.

(iv) The dissection of the tender conditions especially the invoices and pricing by the Division Bench for the purpose of determining the manufacturing process is incorrect in view of the decisions rendered in Arun Electrics [1966] 17 STC 576 (SC), Bharat Sanchar Nigam Ltd. : [2006]282ITR273(SC) and Imagic Creative Pvt. Ltd. : 2008[9]S.T.R.337 .

(v) The view expressed by the earlier Division Bench in Som Distilleries and Breweries Pvt. Ltd. [1997] 1 ILJ 319 on the basis of scrutiny of anatomy of the various provisions of the 1915 Act that bottling is a part of the manufacturing process could not have been distinguished on the ground that the decision was not with respect to the activity of packaging as enshrined under Section 65 (76b) of the Finance Act and the definition under Section 2(f) of the Central Excise Act inasmuch as the said definition by its import excludes the manufacturing process under the Central Excise Act from the net of service tax.

(vi) The Circular F. No. 249/l/2006-CX, dated October 27, 2008 issued by the Central Board of Excise and Customs clarifies the position that the term 'manufacturing process' as far as bottling is concerned, has to be understood in the context of the decision of the apex court and keeping that in view, has taken it out of net of service tax and the said circular is in consonance with the decision rendered by the apex court in Sir Shadi Lal Distillery & Chemical Works : (1998)8SCC428 .

(vii) The process of manufacture as defined under Section 2(14) of the 1915 Act falls within the ambit and sweep of Section 2(f)(i) of the Central Excise Act, 1944 and, therefore, there can be no levy of service tax on manufacture in view of the clear postulate under Section 65 (76b) of the Finance Act, 2005. To elaborate : the fundamental concept of manufacture as engrafted under Section 2(14) of the 1915 Act cannot be regarded as alien to the definition of 'manufacture' under Section 2(f)(i) of the Central Excise Act as has been held by the Division Bench in Vindhyachal Distellaries Pvt. Ltd. .

(viii) The analysis that the bottling of liquor can be independent is not correct, as the liquor cannot be sold without bottling as there is statutory stipulation that the liquor has to be sold in bottles. To further clarify, the container becomes a part of manufacturing process, and that has been so held in Som Distilleries and Breweries Pvt. Ltd. [1997] 1 ILJ 319.

38. In view of the aforesaid, we answer the reference on following terms:

The decision rendered in Vindhyachal Distellaries Pvt. Ltd. does not state the law correctly inasmuch as it has expressed the opinion that packaging and bottling of liquor are not the part of manufacturing process and hence, liable to service tax and we uphold the view taken in Som Distilleries [1997] 1 ILJ 319 and, therefore, rule that packaging and bottling of liquor come within the ambit and sweep of 'manufacture' within the meaning of Clause (f) of Section 2 of the Central Excise Act, 1944 in view of the definition contained in Section 65 (76b) of the Finance Act especially keeping in view the exclusionary facet and further regard being had to the circular issued by Central Board of Excise and Customs.

Let the matter be listed before the appropriate Division Bench for final disposal.