2007 (4) TMI 39 - AT - Service Tax

Appellate Tribunal rules on service tax credit for advertisement charges

COCA COLA INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., PUNE

COCA COLA INDIA PVT. LTD. Versus COMMISSIONER OF C. EX., PUNE - 2007 (7) S.T.R. 529 (Tri. - Mumbai), 2008 (223) E.L.T. 69 (Tri. - Mumbai) Issues:1. Whether the appellant is entitled to take credit of service tax paid on advertisement charges as input service used in or in relation to the manufacture of concentrates.2. Whether the advertisement expenses incurred by the appellant can be considered as input services under the Cenvat Credit Rules.Issue 1:The appellant claimed credit of service tax paid on advertisement charges as input service used in or in relation to the manufacture of concentrates. The Commissioner denied the claim, stating that the advertisement was for the final product, aerated waters, and not for the concentrates. The appellant argued that all advertisements undertaken by them should qualify as input services, eligible for credit. The appellant contended that the definition of 'input services' under the Credit Rules includes services used in or in relation to the manufacture of final products. The appellant emphasized that services like advertisement or sales promotion, even if seemingly unrelated to manufacturing activities, have been considered as input services for the purpose of taking credit. However, the Tribunal found that the advertisement was for promoting the sales of aerated waters, not concentrates, and therefore did not qualify as an input service directly or indirectly used in or in relation to the manufacture of final products. The Tribunal upheld the Commissioner's decision, citing previous judgments supporting the view that advertisement costs for products not manufactured by the appellant are not covered under the definition of 'input service.'Issue 2:The appellant argued that since the advertisement expenses were included in the value of concentrates, they should be considered as input services eligible for credit. They distinguished their case from a previous Supreme Court decision where advertisement expenses were incurred by a third party and not included in the assessable value. The Tribunal noted that in the present case, the advertisement was undertaken by the appellant for promoting the sale of concentrates, not aerated waters. The Tribunal found that the advertisement for aerated waters, which were manufactured by bottlers and not the appellant, could not be considered as an advertisement for concentrates. The Tribunal emphasized that services relating to advertisement or sales promotion must be for the final products only, not for products not manufactured by the appellant. Citing previous decisions, the Tribunal upheld the Commissioner's order, rejecting the appeal and affirming that the advertisement expenses for aerated waters did not qualify as input services for the concentrates manufactured by the appellant.In conclusion, the Appellate Tribunal CESTAT, Mumbai held that the appellant was not entitled to take credit of service tax paid on advertisement charges as input service used in or in relation to the manufacture of concentrates. The Tribunal found that the advertisement expenses were for promoting the sales of aerated waters, not concentrates, and therefore did not qualify as an input service directly or indirectly used in or in relation to the manufacture of final products. The Tribunal upheld the Commissioner's decision, emphasizing that services relating to advertisement or sales promotion must be for the final products only, not for products not manufactured by the appellant.