2025 (1) TMI 73 - AT - Service Tax

Service tax demand set aside as promotional activities for own products don't constitute Business Auxiliary Service

M/s Hindustan Coca Cola Beverages Pvt. Ltd. Versus Commissioner, Customs, Central Excise & Service Tax, Meerut-II

CESTAT Allahabad allowed the appeal in a service tax dispute involving advertisement and promotional activities. The appellant received support price from ... Classification of services - Appellant undertook activities of advertisement and sale promotion of concentrate/flavor belonging to Coca Cola India Pvt. Ltd. and received support price in consideration - Business Auxiliary Service or not - scope of SCN - extended period of limitation. Whether the Respondent was right in extending the scope of the show cause notice by way of confirming the disputed demand under “Business Auxiliary Service” when evidentially the show cause notice has not demanded the Service Tax under any particular service head? - HELD THAT:- Reliance is placed in the case of SYNIVERSE MOBILE SOLUTIONS PVT LTD., (EARLIER TRANSCIBERNET INDIA PVT LTD.) VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, HYDERABAD – IV [2023 (6) TMI 463 - CESTAT HYDERABAD], wherein it has been held it is essential for the show cause notice issuing authority to clearly indicate the sub-clause under which the service tax in question would fall. It is a settled principle of law that the Adjudicating Authority cannot go beyond the scope of SCN which has been laid down by the Hon'ble Supreme Court, inter alia, in cases of COMMISSIONER OF CUSTOMS, MUMBAI VERSUS TOYO ENGINEERING INDIA LIMITED [2006 (8) TMI 184 - SUPREME COURT], COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD [2007 (8) TMI 10 - SUPREME COURT] it has been held that the SCN is the foundation of the case against the assesse and it is not open for the Adjudicating Authority to confirm the demand by travelling beyond the scope of the SCN. Therefore, in the light of the above, the Impugned Order is liable to be set aside. Whether there is any element of service, particularly in the nature of “Business Auxiliary Services” as defined under Section 65(19) of the Finance Act, 1994, involved in receipt of reimbursement amount received from M/s. Coca Cola India Pvt Ltd for joint promotional activities conducted by the Appellant on cost sharing basis with CCIPL, with an objective of promotion of sale of beverages manufactured by the Appellant? - HELD THAT:- The Appellant has undertaken promotion, marketing of their final product i.e. beverage and not that of concentrates (i.e. industrial input), therefore, the conditions specified in clause (i) of Section 64 (19) of the Act are not fulfilled. Accordingly, the demand in the present case is liable to be set aside - Appellant has not provided any “Business Auxiliary Services” to the CCIPL as per the provision of law, therefore, the Adjudicating authority has completely erred in invoking the Section 65(19)(i) in the instant case. Whether the Respondent is right in confirming the demand on the extended period of limitation? - HELD THAT:- The onus to prove that Appellant has deliberately suppressed the facts from the Department and that such suppression was with intent to evade payment of duty is on the Department. However, in the impugned SCN, the Respondent has neither put forth any averment nor has produced any documentary evidence for establishing the suppression and mala fide intent on part of the Appellant. Therefore, the question of invocation of extended period of limitation does not arise at all. In the identical case of Commissioner of Central Excise & ST., Lucknow vs. M/s. Brindavan Bottlers Limited [2019 (3) TMI 1428 - CESTAT ALLAHABAD], the Tribunal held that there is no element of service in expenses for achieving the sales target, incentive or advertisement and publicity expenses reimbursed to the Appellant by the Coca-Cola Company Ltd. There is no element of service, and the Appellant therein is not providing any service to Coca Cola Company Ltd and the Appellant therein and Coca Cola are working on a principal-to-principal basis. Reliance placed in SMV Beverages Private Limited vs. Commissioner of Central Excise, Nagpur [2017 (3) TMI 942 - CESTAT MUMBAI] wherein in the identical set of facts the Tribunal has held that when the concentrate is sold on payment of excise duty to the main appellant, which would indicate that once the sale takes place, the concentrate does not remain the property of PFL. Conclusion - i) It is a settled principle of law that the Adjudicating Authority cannot go beyond the scope of SCN. ii) Appellant has not provided any “Business Auxiliary Services” to the CCIPL as per the provision of law. iii) in the impugned SCN, the Respondent has neither put forth any averment nor has produced any documentary evidence for establishing the suppression and mala fide intent on part of the Appellant. Therefore, the question of invocation of extended period of limitation does not arise at all. The impugned order cannot be sustained - appeal allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions addressed in the judgment are:Whether the Respondent was justified in confirming the disputed demand under 'Business Auxiliary Service' without specifying the particular service head in the show cause notice (SCN).Whether there exists an element of service, specifically 'Business Auxiliary Services' as defined under Section 65(19) of the Finance Act, 1994, in the reimbursement received from Coca Cola India Pvt Ltd (CCIPL) for joint promotional activities.Whether the Respondent correctly invoked the extended period of limitation for confirming the demand.2. ISSUE-WISE DETAILED ANALYSISIssue I: Scope of the Show Cause NoticeLegal Framework and Precedents: The SCN must clearly specify the sub-clause under which the service tax is demanded. The failure to do so can vitiate the entire proceeding.Court's Interpretation and Reasoning: The court found that the SCN did not specify any sub-clause of Section 65(19), making the demand vague and unspecific.Key Evidence and Findings: The SCN lacked specific allegations regarding the taxable service provided by the Appellant.Application of Law to Facts: The court held that the adjudicating authority cannot extend the scope of the SCN beyond what was originally alleged.Treatment of Competing Arguments: The Respondent's justification was rejected due to the lack of specificity in the SCN.Conclusions: The demand based on an unspecific SCN is not sustainable.Issue II: Element of Service in ReimbursementLegal Framework and Precedents: For an activity to be classified as 'Business Auxiliary Service,' it must involve promotion or marketing of goods belonging to a client.Court's Interpretation and Reasoning: The court found no service provider-client relationship between the Appellant and CCIPL. The promotion was for the Appellant's own products, not CCIPL's concentrates.Key Evidence and Findings: The activities were part of a cost-sharing arrangement for promoting the Appellant's beverages.Application of Law to Facts: The court concluded that the Appellant was not providing 'Business Auxiliary Services' to CCIPL.Treatment of Competing Arguments: The Respondent's argument was dismissed as the promotion was for the Appellant's products.Conclusions: The demand for service tax under 'Business Auxiliary Service' was unjustified.Issue III: Extended Period of LimitationLegal Framework and Precedents: The extended period can be invoked in cases of fraud, collusion, or suppression of facts with intent to evade tax.Court's Interpretation and Reasoning: The court found no evidence of suppression or intent to evade tax by the Appellant.Key Evidence and Findings: The Appellant had disclosed all transactions in their accounts and filed regular returns.Application of Law to Facts: The court held that the extended period was not applicable as there was no deliberate suppression.Treatment of Competing Arguments: The Respondent's claim of suppression was not substantiated with evidence.Conclusions: The invocation of the extended period was unwarranted.3. SIGNIFICANT HOLDINGSVerbatim Quotes: 'The entire demand in the present case was based on unspecific and vague allegations, the same ought to have been dropped.'Core Principles Established: The necessity for specificity in SCNs, the definition of 'Business Auxiliary Services,' and the criteria for invoking the extended period of limitation.Final Determinations: The appeal was allowed, setting aside the impugned order and confirming that no service tax was payable under the alleged 'Business Auxiliary Service.'The judgment underscores the importance of clarity in tax demands and the protection of taxpayers from vague allegations. It also reinforces the principle that promotional activities for one's own products do not constitute services to another entity merely because of a cost-sharing arrangement.