Page 142 - GSTL_2nd July 2020 _Vol 38_Part 1

60 GST LAW TIMES [ Vol. 38
2020 (38) G.S.T.L. 60 (Tri. - All.)

IN THE CESTAT, REGIONAL BENCH, ALLAHABAD
[COURT NO. I]
Ms. Archana Wadhwa, Member (J) and Shri Anil G. Shakkarwar,
Member (T)
K.N. FOOD INDUSTRIES PVT. LTD.

Versus
COMMISSIONER OF CGST & C. EX., KANPUR
Final Order No. ST/A/71917/2019-CU(DB), dated 26-11-2019 in Appeal
No. ST/70737/2018
Job charges - Ex-gratia job charges - Assessee manufacturing confec-
tionaries for and on behalf of principal and clearing goods on payment of Ex-
cise duty on basis of MRP declared by principal - When assessee’s capacity, as
a manufacturer not being fully utilized by principal, ex-gratia charges paid to
compensate them from financial damage/injury - Ex-gratia amount not fixed
and mutually decided between two parties - Charges in nature of compensa-
tion in case of low/less utilization of production capacity of assessee - Section
65B(44) of Finance Act, 1994 refers to process amounting to manufacture or
production of goods on which duty leviable under Section 3 of Central Excise
Act, 1944 as on service - No Service Tax leviable on such services, as covered
under negative list - Ex-gratia charges made by principal to assessee were to-
wards making good damages, losses or injuries arising from “unintended”
events and does not emanate from any obligation on part of any of parties to
tolerate an act or a situation and cannot be considered to be payments for any
services - Demand of Service Tax set aside. [paras 4, 5]
Appeal allowed
REPRESENTED BY : Shri H.P. Kanade, Advocate, for the Appellant.
Shri Shiv Pratap Singh, AR, for the Respondent.
[Order per : Archana Wadhwa, Member (J)]. - As per facts on record the
appellant is engaged in the manufacture of confectionaries falling under Chapter
17 of Central Excise Tariff Act, 1985 for and on behalf of the principal manufac-
turer M/s. Parle Biscuits Pvt. Ltd., in terms of the agreement entered between the
two. M/s. Parle is procuring the raw material and supplying the same to the ap-
pellant for manufacture of the confectionaries, which were being cleared by the
appellant on payment of Excise duty on MRP as declared by M/s. Parle.
2. M/s. Parle is making payment of job charges to the appellant on per
kilo basis of confectionary as agreed upon between the two. However in case the
quantum of goods got manufactured by M/s. Parle is less than standard mutual-
ly agreed upon quantum, the appellants are entitled ex-gratia job charges to cover
up the loss or deficiencies in normal job charges to be received by the appellant.
The quantum of ex-gratia to be given to the appellant is computed based upon
various factors like ‘Per Day Maximum Output’ based on production capacity,
‘Packing Capacity’ of per month and ‘Output Ratio’ arrived at operating time of
the plant to manufacture the confectionaries etc. As such, bills are raised by the
appellant and paid by M/s. Parle.

GST LAW TIMES  2nd July 2020  142