Tribunal rules in favor of appellant on service tax liability for beer manufacturing under Business Auxiliary Service

The tribunal ruled in favor of the appellant, determining that their manufacturing activity of beer under a brand name fell under the amended definition of Business Auxiliary Service (BAS). The tribunal also held that the appointed date of amalgamation should be considered for service tax liability and that the demand was barred by limitation due to the absence of willful suppression of facts. As a result, the tribunal set aside the previous order and allowed the appeal.

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Issues Involved:
1. Classification of the appellant's activity under "Business Auxiliary Service" (BAS).
2. Date of amalgamation/merger for considering service tax liability.
3. Applicability of the extended period of limitation for the demand.

Issue-wise Detailed Analysis:

1. Classification of the Appellant's Activity under "Business Auxiliary Service" (BAS):

The appellant manufactured and sold beer under the brand name of M/s United Breweries Ltd. (UBL) based on an agreement. The Revenue alleged that this activity fell under the taxable category of "Business Auxiliary Service" (BAS) as amended w.e.f. 01.09.2009, particularly under clause (v) "production or processing of goods for, or on behalf of, the client." The appellant contended that their activity was purely a manufacturing process using their own raw materials and infrastructure, and they paid UBL for using the brand name, which was already taxed under Intellectual Property Right Services.

The tribunal noted the changes in the definition of BAS before and after 01.09.2009, which excluded any activity that amounts to "manufacture" of excisable goods. Post-amendment, the exclusion was limited to "manufacture of excisable goods" as defined under the Central Excise Act, 1944. Since alcoholic beverages are non-excisable goods, the tribunal concluded that the appellant's activity fell within the scope of BAS. The tribunal also referred to the Delhi High Court judgment upholding the constitutional validity of service tax on contract manufacturing of alcoholic beverages.

2. Date of Amalgamation/Merger for Considering Service Tax Liability:

The scheme of amalgamation approved by BIFR mentioned 01.04.2010 as the appointed date, while the effective date was 16.11.2011, when the order was filed with the Registrar of Companies. The appellant argued that the appointed date should be considered for determining service tax liability, citing the Supreme Court's judgment in Marshall & Sons Co. India Ltd. v. ITO, which held that the appointed date in the scheme should be the date of amalgamation unless the court specifies otherwise.

The tribunal agreed with the appellant, stating that the appointed date should be considered as the date of amalgamation. The tribunal referred to various judgments, including Marshall & Sons and ITC Hotels Ltd., which supported the view that the appointed date in the scheme of amalgamation should be the effective date for all purposes, including tax liability.

3. Applicability of the Extended Period of Limitation for the Demand:

The appellant argued that the extended period of limitation could not be invoked as there was no willful suppression of facts. The consideration paid to UBL for using the brand name was already taxed under IPR services, and the arrangement was known to the department. The Revenue contended that the appellant did not disclose the manufacturing agreement to the department and thus suppressed material facts.

The tribunal found that the arrangement between the appellant and UBL was disclosed, and the consideration for using the brand name was already taxed. Therefore, the allegation of suppression could not be sustained, and the demand was barred by limitation.

Conclusion:

1. The appellant's activity of manufacturing beer under the brand name of UBL falls under the amended definition of BAS, and the computation of demand should consider Notification No. 39/2009-ST.
2. The appointed date of 01.04.2010 in the scheme of amalgamation should be considered for determining service tax liability.
3. The demand is barred by limitation due to the absence of willful suppression of facts.

The tribunal set aside the impugned order and allowed the appeal.

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