Tribunal quashes service tax demands for liquor manufacturer based on CBEC circulars

The Tribunal set aside the service tax demands under 'Franchisee Service' against the appellant, engaged in liquor manufacturing and marketing, totaling Rs. 42,22,18,962/-. The Tribunal found the demands not legally sustainable based on relevant CBEC circulars. Additionally, the Tribunal allowed the appellant's appeal against the demand of Rs. 53,99,881/-, ruling that there was no breach of Cenvat Credit Rules due to the merger of entities and compliance with the rules.

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Issues:
1. Whether the appellant provided 'Business Auxiliary Service' or 'Franchisee Service' to various bottlers.
2. Validity of the demand of service tax and reversal of cenvat credit.
3. Applicability of Rule 6(3)(c) of the Cenvat Credit Rules, 2004.

Analysis:

1. The appellant, engaged in manufacturing and marketing liquor, faced service tax demands under 'Business Auxiliary Service' and 'Franchisee Service.' The department issued five show cause notices, demanding a total of Rs. 42,22,18,962/- and reversal of cenvat credit amounting to Rs. 53,99,881/-. The Commissioner confirmed demands under 'Franchisee Service' in four notices, totaling Rs. 42,22,18,962/-. The appellant contended that the Tribunal previously ruled in similar cases that the arrangements did not constitute 'Franchisee Service.' The Tribunal referred to relevant CBEC circulars and held the demand under 'Franchisee Service' was not legally sustainable, setting it aside.

2. Regarding the demand of Rs. 53,99,881/-, the appellant argued against Rule 6(3)(c) of the Cenvat Credit Rules, 2004, stating it should not apply on a monthly basis. The appellant cited cases supporting their argument. The A.R. supported the impugned order. The Tribunal found no violation of Cenvat Rules, noting the merger of Seagram Manufacturing Pvt Ltd with the appellant and that the credit utilization was below the 20% limit specified in Rule 6(3)(c). Citing a similar case, the Tribunal concluded there was no breach of Cenvat Credit Rules and allowed the appeal.

3. The Tribunal analyzed the agreements and relevant circulars to determine the nature of services provided by the appellant to bottling units. The Tribunal considered the terms of the agreement, lack of intellectual property transfer, and commercial interests involved. Referring to CBEC circulars and previous decisions, the Tribunal concluded that the demand under 'Franchisee Service' was not sustainable. Additionally, the Tribunal addressed the demand related to invoices and cenvat credit, finding no grounds for denial based on the merger of entities and compliance with Cenvat Credit Rules.

This comprehensive analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the Tribunal's detailed reasoning leading to the final decision.

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