2017 (3) TMI 1106 - AT - Service Tax

Tribunal rules in favor of appellant, sets aside service tax demand for brand promotion activities.

M/s Narmada Drinks (P) Ltd Versus CCE, Raipur

M/s Narmada Drinks (P) Ltd Versus CCE, Raipur - 2017 (5) G.S.T.L. 369 (Tri. - Del.) Issues:1. Demand of service tax under 'Business Auxiliary Service' on the appellant.2. Applicability of service tax for the period prior to 1.7.2010.3. Interpretation of the term 'Business Auxiliary Service' under Section 65(19)(zzb).4. Justification of the demand of service tax based on the nature of payments received.Issue 1: Demand of service tax under 'Business Auxiliary Service' on the appellant.The appellant, a manufacturer of aerated water and an authorized bottler of Coca Cola, received amounts under 'Sales Target Incentive' and 'Advertisement and Publicity expenses.' The Department alleged that these amounts were for brand promotion of Coca-Cola, leading to the demand of service tax under 'Business Auxiliary Service' as per the impugned order.Issue 2: Applicability of service tax for the period prior to 1.7.2010.The appellant argued that the new service for brand promotion came into effect from 1.7.2010 and cannot be applied for the period before that date. They contended that the activity does not fall under 'Business Auxiliary Service' for the prior period as it covers only promotion and marketing of goods/services.Issue 3: Interpretation of the term 'Business Auxiliary Service' under Section 65(19)(zzb).The Tribunal noted that the appellant's service was likely charged under 'Promotion or marketing or sale of goods produced or service provided by the client' within BAS. However, the lack of investigation into the reasons for the payments received made it unclear why the amounts were received from Coca-Cola for brand promotion.Issue 4: Justification of the demand of service tax based on the nature of payments received.The Tribunal analyzed that the promotion of the brand name by the appellant, who manufactures goods under the Coca Cola brand, does not fit under the BAS definition covering marketing or sale of goods. Referring to a TRU letter, it was highlighted that a new service for brand promotion was introduced from 1.7.2010, and activities covered under the new service cannot be taxed under BAS for the earlier period.In the judgment, the Tribunal found that the demand of service tax under BAS for the period 2006-07 to 2009-2010 lacked justification. Citing precedents and legal interpretations, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.