2020 (3) TMI 913 - AT - Service Tax

Tribunal rules in favor of appellant, rejecting Service Tax demand for promoting Coca Cola concentrates.

Kandhari Beverages Pvt Ltd Versus Commissioner of CE & ST, Chandigarh-II

The Tribunal set aside the Commissioner's confirmation of a Service Tax demand of Rs. 3,74,67,511 against the appellant for promoting concentrates owned ... Business Auxiliary Services - promotion or marketing of goods produced or provided by or belonging to the client - transfer of right to use - demand of interest and penalties - extended period of limitation - HELD THAT:- By stating that the goods namely concentrate was transferred for use by M/s Coca Cola India Pvt Ltd to the Appellant for consideration, a fact not in dispute, the sale of the goods in term of Central Excise Act, 1944 has occurred. The imposition of restrictions or conditions in respect of the usage and consumption of the concentrate, by the seller cannot alter that position. Hence there are no merit in the submission of the Authorized Representative that this transaction was not a truncation of sale but only “transfer to use”. In any case if the arguments advanced by the Authorized Representative, were to be accepted then in every case, sale promotion activities undertaken by the manufacturer of finished product, shall amount to sale promotion of the raw material, and the service so rendered to the raw material supplier will be taxable as Business Auxiliary Service in this category. This is neither the intention nor the rationale of the scheme of taxable category defined as “Business Auxiliary Service”. Appeal allowed - decided in favor of appellant. Issues Involved:1. Confirmation of Service Tax demand.2. Imposition of penalties.3. Classification of activities under Business Auxiliary Services (BAS).4. Applicability of previous judgments and legal precedents.Issue-wise Detailed Analysis:1. Confirmation of Service Tax Demand:The Commissioner of Central Excise, Chandigarh II, confirmed a demand of Service Tax amounting to Rs. 3,74,67,511 against the appellant by invoking the extended period of limitation under Section 73 of the Finance Act, 1994. This demand was based on the allegation that the appellant was providing Business Auxiliary Services (BAS) by promoting the sale of concentrates owned by Coca Cola India Pvt Ltd (CCIPL) while undertaking the sale promotion program for beverages.2. Imposition of Penalties:The Commissioner imposed various penalties on the appellant:- Rs. 1000 for the period prior to 16.05.2008.- Rs. 200 per day from 16.05.2008 until the final payment of service tax.- Rs. 5000 under clause (b) of Section 77 of the Finance Act, 1994.- Rs. 3,74,67,511 under Section 78 for willful suppression of taxable value with intent to evade payment of Service Tax.3. Classification of Activities under Business Auxiliary Services (BAS):The primary contention was whether the appellant's activities of promoting beverages, which indirectly promoted the concentrates, fell under the category of BAS. The appellant argued that their case was settled in their favor by previous decisions, such as those in Superior Drinks Pvt Ltd and Narmada Drinks (P) Ltd, which held that such promotions did not constitute BAS.4. Applicability of Previous Judgments and Legal Precedents:The appellant cited several decisions to support their case, including:- Superior Drinks Pvt Ltd [2019 (6) TMI 272 – CESTAT Mumbai]- Narmada Drinks (P) Ltd [2017 (5) GSTL 369 (T-Del)]- Brindavan Bottlers Ltd [2019 (27) GSTL 354 (T-All)]- SMV Beverages Pvt Ltd [2018 (17) GST 284 (T-Mum)]- Hindustan Aeronautics Ltd [2019 (370) ELT 699 (T-Bang)]The Revenue, however, contested these decisions, arguing that the agreements and relationships between Coca Cola USA, Coca Cola India, and the bottlers were not adequately considered in previous judgments. They emphasized that the bottler's promotional activities directly benefited Coca Cola India and should be taxable under BAS.Tribunal's Findings:The Tribunal found that the issue was squarely covered by previous decisions, particularly the one in Superior Drinks Pvt Ltd, which followed similar cases like Narmada Drinks (P) Ltd. The Tribunal noted that the agreements cited by the Revenue were not part of the relied-upon documents in the Show Cause Notice and thus could not be considered.The Tribunal also clarified that the sale of concentrates to the appellant constituted a sale under Section 2(h) of the Central Excise Act, 1944, and the promotional activities did not amount to BAS. They rejected the Revenue's argument that the transaction was merely a 'transfer for use' and not a sale.Conclusion:The Tribunal concluded that the impugned order lacked merit and set it aside, thereby allowing the appeal. The decision emphasized that promotional activities by a manufacturer of finished products do not automatically translate to the promotion of raw materials for the supplier, aligning with the rationale of the scheme of taxable categories under BAS.