Tribunal rejects Service Tax demand on marketing services for aerated waters

The Tribunal set aside the demand for Service Tax on amounts received by a manufacturer of aerated waters for marketing and promotional services from soft drink brand owners. The Tribunal ruled that the activities of the manufacturer did not fall under 'Business Auxiliary Service' as alleged by the Department. Therefore, the Service Tax demand totaling Rs. 54,84,950 along with interest and penalties was dismissed in favor of the appellant. The Order was issued on 18/06/2018.

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Issues:
Demand of Service Tax on amounts received under 'Support Price' and 'Sales Target Incentive' for marketing and promotional activities.

Analysis:
The appeal challenged an Order-in-Original regarding the demand of Service Tax on amounts received by the appellant, a manufacturer of aerated waters, from soft drink brand owners for marketing and promotional services. The Department contended that these amounts fell under 'Business Auxiliary Service' and issued a show cause notice. The lower Authority upheld the demand of Service Tax totaling Rs. 54,84,950 along with interest and penalties under various sections of the Finance Act.

The appellant argued that similar issues had been decided in their favor in previous proceedings before the Tribunal and the Commissioner (Appeals). The appellant's advocate highlighted that the Tribunal had set aside the demand for Service Tax in an earlier order due to the amendment in the definition of 'Business Auxiliary Service' effective from 01/07/2010. However, the Department sought to distinguish the earlier order, emphasizing that the present period fell after the said amendment, justifying the demand.

Upon review, the Tribunal observed that the appellant, as a bottler, received concentrate from brand owners like M/s Coca Cola for manufacturing aerated products under the brand name. The show cause notice alleged that the amounts received were for promoting and marketing the brand name of the owners. The Tribunal noted that the appellant's activities did not involve marketing or selling the concentrate itself but focused on manufacturing and selling aerated water under the brand name. It was clarified that the appellant's participation in promoting brand names like 'Coca Cola' did not fall under 'Promotion or Marketing or Sale of Goods Produced or Service Provided by the Client' as per 'Business Auxiliary Service'.

Consequently, the Tribunal found no justification for the Service Tax demand, ultimately setting it aside and allowing the appeal in favor of the appellant. The Order was pronounced in open Court on 18/06/2018.

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