2013 (12) TMI 1069 - AT - Service Tax

Appeal dismissed, upholding service tax demand for Business Auxiliary Service on diamond jewelry promotion.

BRIGHTEST CIRCLE JEWELLERY PVT LTD Versus COMMISSIONER OF SERVICE TAX, MUMBAI

The appeal was dismissed, upholding the demand of service tax amounting to Rs. 1,13,13,784/-, including interest and penalty. The adjudication order ... Stay application - Demand of service tax - Business Auxiliary Service - Held that:- Service provided by DTC is in relation to promotion or marketing of the sale of diamond jewellery manufactured by the assessee and this constitutes BAS as defined in the Act. Under Section 66A of the Act, an assessee is the recipient of BAS provided by the overseas company DTC and was thus obligated to remit service tax on the amounts remitted by it to DTC - no justification for grant of waiver of the assessed liability of the petitioner/assessee nor grant of stay of recovery of the adjudicated amount. We grant eight weeks to the petitioner/assessee to make the deposit, for entertainment of hearing of the appeal and direct report of compliance by 18.7.2013. In default either in deposit or reporting compliance within the stipulated time, the appeal is liable to be rejected and dismissed for failure of pre-deposit - Prima facie case not in favour of assessee - Stay granted partly. Issues:1. Confirmation of demand of service tax by the adjudication order.2. Assessment of whether the services provided constitute Business Auxiliary Service (BAS).3. Interpretation of the agreement between the parties.4. Determination of the nature of the services provided by the overseas company.5. Consideration of waiver of assessed liability and stay of recovery.Confirmation of demand of service tax:The appeal was filed against an adjudication order confirming the demand of service tax amounting to Rs. 1,13,13,784/-, including cesses. The order also included the recovery of interest and penalty equal to the tax assessed under Section 78 of the Finance Act, 1994.Assessment of services as Business Auxiliary Service (BAS):The Revenue assumed that the assessee provided BAS to Diamond Trading Corporation (DTC) under an agreement. The agreement involved marketing and promotional activities related to diamond jewelry. The adjudicating authority concluded that the assessee was liable to remit service tax under the reverse charge mechanism of Section 66A of the Act for the taxable service BAS provided by DTC.Interpretation of the agreement:The agreement between the parties detailed the marketing strategies, consumer demand research, and promotional campaigns commissioned by DTC for the promotion of licensed products, including diamond jewelry. The agreement specified the contributions of both DTC and the assessee towards the marketing campaigns and acknowledged the benefits to be derived by the assessee from the DTC marketing campaign.Nature of services provided by the overseas company:The Department considered the services provided by DTC, as per the agreement, to fall under BAS defined in the Act. The advertisements filed as evidence revealed that the focus was on promoting Nakshtra diamond jewelry, not raw diamonds or their quality. The services were deemed to be in relation to the promotion and marketing of diamond jewelry manufactured by the assessee.Consideration of waiver and stay of recovery:The contention that the activities under the agreement could constitute Intellectual Property Service or Advertising Agency Service, but not BAS, was dismissed. The Tribunal held that the services provided by DTC were indeed related to the promotion and marketing of diamond jewelry, thus falling under BAS. The Tribunal found no justification for granting a waiver of the assessed liability or stay of recovery, directing the petitioner to make the deposit within eight weeks, failing which the appeal would be rejected for non-compliance.The judgment upheld the demand for service tax based on the nature of services provided under the agreement, emphasizing the obligation of the assessee to remit service tax on the amounts paid to DTC for the marketing and promotional activities related to diamond jewelry.