( 1. ) IN these writ petitions the question involved is whether service tax on packaging i. e. bottling and labelling of liquor, can be exacted from the distillers and whether they can pass on this liability to the contractors obtaining the supplies from them.

( 2. ) THE petitioners are distillers/retail contractors, licence has been granted for supply of country made liquor for the warehouses situated in various districts of the State of Madhya Pradesh to distillers. The retail contractors take supply from the distillers under the terms of CS-I licence issued to distillers and CS-II licence issued to the retail contractors. The distiller is entitled to receive the cost price of liquor from the Government and the sealing and bottling charges from the retail contractors. The retail contractors are required to deposit the bottling and sealing charges in advance before lifting the country liquor from the warehouse. Licence (P-3) was issued to M/s. Vidhyachal Distilleries Pvt. Ltd. (in W. P. No. 2346/2006 ).

( 3. ) IT is further averred that on 16. 6. 2005 Section 65 (76) (b) of the Finance Act, 2005 was amended and "packaging Activity" was also brought within the ambit of service tax. On 9th September, 2005, the Commissioner, Customs and Central Excise, Indore wrote letter (P-4) to the Excise Commissioner, M. P. It was clarified that under Section 65 (76) (b) inserted by the Finance Act, 2005 the service tax was imposed w. e. f. 16. 6. 2005. The Excise Commissioner directed as per letter (P-5), dated 13. 9. 2005 all the distillers/service providers to get themselves registered with department of Excise and to pay the service tax @ 10. 2% on packaging/sealing charges of Rs. 2. 25 per bottle.

( 4. ) THE petitioner M/s. Vindhyachal Distilleries Pvt. Ltd. got the registration certificate (P-6) under Section 69 of the Finance Act. After registration the distillers demanded the service tax @ 10. 2% on the packaging/sealing charges of Rs. 2. 25 per bottle from the retail contractors, same was disputed by them. There was some conflict of opinion as apparent from letter (P-7) dated 27. 9. 2005. However, clarincatory letter (P-8) was issued on 27th September, 2005 by the Excise Commissioner, M. P. Gwalior, it was explained that service tax was an indirect tax and though the liability of payment of the same was on the distillers i. e. the service provider but the same could be passed on to the retail contractors. The retail contractors could also pass it on to the actual consumers. One Shri Akhilesh Rai filed a writ petition without impleading M/s. Vindhyachal Distilleries Pvt. Ltd. and injunction was granted. Suit was also filed, filing of suit was suppressed, an order (P-II) was passed in W. P. Nos. 13906/05,14045/05,13052/05, in which this Court held that service tax was to be realised by the Central Excise Department from the service provider, however, distiller (service provider) was given liberty to seek appropriate remedy as may be available in accordance with law. Whether service tax could be passed on, was not adjudicated upon. It is submitted that distiller has a right to pass on the service tax to the retail contractors. Service tax by nature is such a tax, which is meant to be passed on to the actual users. It was directed by District Excise Officer not to collect the service tax from the retail contractors.

( 5. ) IT is further submitted that under the Madhya Pradesh Country Spirit Rules, 1995 the distillers are given a CS-1 licence to manufacture country spirit from rectified spirit by essencing, colouring, flavouring, reducing, blending etc. at the manufacturing warehouses. Colouring and flavouring agents are added at the time of maturation. This is a process of treatment given to over proof spirit in order to render it fit for human consumption in the form of country liquor. This process is manufacturing of country liquor in the real sense as well as within the meaning and scope of Central Excise Act, 1944 and M. P. Exci