TaxTMI 
TaxTMI 
2019 (7) TMI 955
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....12.2012 for recovery of the said amount along with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. Hence, the present appeal. 3. The learned Advocate Shri Anil Malani for the Appellant has submitted that by brewing agreement between the Appellant and M/s UBL dt.01.04.2005 and further amended by the agreement dt.02.03.2009, M/s UBL being owner of 'King Fisher' and 'London Pilsner Brands' permitted the Appellant to manufacture and sell the branded beer. Under the said agreement, UBL granted non-assignable, non-transferable and non-exhaustive rights to the Appellant to brew the beer under the brand owned by UBL. The Appellant had paid UBL all inclusive consideration of Rs. 5/- per case of beer for usage of brand names of UBL and UBL has discharged service tax liability on the said amount under Intellectual Property Right Services. The Appellant has undertaken manufacturing of beer on his own and sold the same to third party in the same manner it manufactured and sold beer under on its own brand name. The entire production bearing the brand name of UBL has been sold by the Appellant directly to the customers, distributors of UBL and also to....
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....hers - 1982 (10) ELT 142 (Bombay), Poona Bottling Company & Another Vs UoI - 1981 (8) ELT 389 (Delhi), Rubicon Formulations Ltd Vs CCE & ST, Aurangabad - 2010 (19) SER TR 515, UOI Vs Cibatul Ltd - AIR 1986 SC 281, CIT Vs B.M. Kharwar - AIR 1969 SC 812, Hindu Shipyard Ltd Vs State of Andhra Pradesh - AIR 2000 SC 2411. 3.2 Learned Advocate has vehemently argued that in any transaction of service tax, there has to be a service provider who renders service and the service receiver of the said service. In the present case, service provider has been rendering service under IPR service in terms of Circular No.249/1/2006-CX-4, dt.27.04.2008. Since UBL has already provided service on its beer brands manufactured by the Appellant, on the same transaction again how Appellant could have provided service to UBL. It is his contention that Service tax cannot be calculated at both ends of the same transaction. Referring to Section 67 of the Finance Act, 1994, the learned Advocate has submitted that receipt of consideration is a pre-requisite for service tax levy; in the present case the consideration was for the goods supplied and not for the services rendered. The Appellant had not received an....
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....ifferent notification prior to 01.07.2012. Applying the same analogy of manufacture of goods, being purely a "manufacturing activity" service tax also cannot be levied for the period 01.09.2009 to 30.06.2012 as the period prior to it exempts applicability of service tax on manufacture. 3.4 Learned Advocate has further submitted that as per the scheme of amalgamation sanctioned by BIFR, the Appellant has merged in UBL w.e.f. 01.04.2010, hence there is no question of any liability of service tax after the said date. He has submitted that the amalgamation is done as per Section 17 (2) of Sick Industrial Companies (Miscellaneous Provisions) Act, 1987 and the said Act is having over-riding effect over all other laws for the time being in force. The scheme has attained finality under the said Act. In support, he has referred to the judgment on the issue viz. Marshal & Sons Vs Income Tax Officer - 1997 (2) SCC 302, CCE Trichy Vs IOC Ltd - 2011 (23) SER TR 625. 3.5 He has further contended that once applicable sales tax/VAT is paid on the transaction, service tax is not payable again in relation to the subject transaction. He has referred to the judgment in the case of Idea Mobile Co....
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....t that they were not manufacturing beer on behalf of M/s UBL, but were using the rights of brand name used by them for which they were paying Rs. 5/- per case, is not correct. On the contrary, every aspect of production as well as disposal was controlled by UBL which has been clearly spelt out in the adjudication order passed by the Commissioner. 4.2 Referring to the Notification NJo.39/2009-ST, dt.23.09.2009, the learned A.R. has submitted that valuation in this regard has been prescribed, which is equivalent to the cost of production less the value of the input, based on which the taxable value of the goods could be arrived at. However, the basic condition to apply the said notification is that the service provider should maintain separate account of receipt, production, inventory and dispatches of goods as well as the financial transaction between the alcoholic beverages manufactured on his own account and manufactured on behalf of another. In the present case, the Appellant has not complied any of the said condition. Further, he has submitted that reliance placed on the Circular of 2008 was erroneous, especially in view of Notification Nol.39/2009 which encompasses various c....
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....n the instant case that there is no privity of Section 391 or 392 of the Companies Act over the GVAT Act. 4.5 The learned A.R. has further submitted that it is relevant to keep in mind that in applying the ratio of the judgment, the Hon'ble Courts have held that the precedent is valid for what it actually decides. In support, he has referred to the judgment in the case of Ambica Quarry Works & Anr. Vs State of Gujarat & Ors. - 1987 SCR (1) 562, CCE Mumbai Vs Fiat India Pvt. Ltd - 2012 (283) ELT 161 (SC). 4.6 On the issue of limitation, the learned A.R. has submitted that neither copy of the contract was declared to the Department nor the transactions had been mentioned in the ST-3 returns filed by the Appellant. As there was no declaration at any stage to the Department about the said activity pursuant to the brewing agreement, therefore, the Appellant has suppressed the material facts, hence, the demand is rightly confirmed invoking extended period of limitation. 5. Heard both sides at length and perused the records. 6. The issues involved in the present appeal for determination are whether: (i) the Appellants, who manufactured beer, affixed with the Brand nam....
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....to read the relevant provisions of the Finance Act,1994 i.e. the definition of Business Auxiliary Services (BAS) as contained in Sec.65(19) of the said Act prior to and after 01.09.2009. Before 01.9.2009 [(19) "business auxiliary service" means any service in relation to, - (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or [ * * * * ] (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or [Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;] [(v) production or processing of goods for, or on behalf of, the client;] (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remitta....
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....ity that amounts to manufacture of excisable goods]. [Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, - (a) "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person - (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services; [(b) "excisable goods" has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944 (1 of 1944); (c) "manufacture" has the meaning assigned to it in clause (f) of section 2 of the Central 11. The change that has been brought into the definition of the BAS w.e.f. 01.9.2009 is the nerve chord of dispute. In the previous definition the exclusion clause was expressed as: ....
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....ness auxiliary service', and leviable to service tax. The said argument of the revenue finds support from the circular issued by the board after amendment, the relevant portion reads as under: Government of India Ministry of Finance Department of Revenue Tax Research Unit *** D.O.F. No.334/13/2009-TRU New Delhi, 6th July, 2009 Dear Chief Commissioner/Director General/Commissioner, The Finance Minister has introduced the Finance (No. 2) Bill, 2009 in the Lok Sabha on the 6th of July, 2009. Clause 112 of the Finance (No. 2) Bill, 2009 covers all the changes relating to Chapter V of Finance Act, 1994. Changes are also being proposed in the provisions of the, xxxxxx 3. Alteration in the scope of existing taxable services : The following alteration/modifications have been done in the existing taxable services. These changes would come into effect from a date to be notified after the enactment of the Finance (No. 2) Bill, 2009. 3.1 Modification in Business Auxiliary Service (BAS) [section 65(19)] :- It may be recalled that production or processing of goods for or on behalf of a client falls within the purview of t....
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....e sales Tax/VAT, hence, the production and manufacture of beer is on their own account and not for or on behalf of M/s UBL, merely because of the fact that they affix the brand name belonging to M/s UBL. In support of their argument, they heavily relied upon the judgement of the Hon'ble Supreme Court in Cibatul Ltd.'s case, Delhi High Court judgement in Poona Bottling Co. Ltd.'s case, later upheld by the Hon'ble Supreme Court and other case laws on similar line. 19. In order to examine the said contention, it is quite essential to analyze the arrangement/agreement between the Appellant and M/s SKOL through the agreement dt.01.4.2005. In the recital of Agreement the intention and purpose behind such agreement has been spelt out in clear terms; it is M/s UBL who was on the lookout for reliable brewer for manufacturing and bottling beer in various territories. Under Clause 5.9 of the agreement, it is made clear that the Appellant was manufacturing and disposing UBL's beer to State Beverages Corporation / State regulated Depots or to the wholesellers, indentors holding necessary permit licences under the relevant Excise law and who are authorized to purchase/sale. beer in terms of r....
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....t of raw materials and joint manufacturing programme drawn by the buyer and the seller. 24. In the said case the facts in brief are that M/s Cibatul Ltd (the seller) had entered into an agreement with M/s Ciba Geigy of India Ltd.(the buyer) on 24.07.1971 under which the products, namely, UF resins and MF resins were to be manufactured by the seller in accordance with the manufacturing programme drawn up jointly by seller and the buyer. The Resins were to be manufactured in accordance with the restrictions and specifications constituting buyer's standards and they were supplied at the prices agreed upon between the sellers and the buyers from time to time. The buyer was entitled to test a sample of each batch of these goods and it was only after approval by the buyers the goods were released for sale to the buyers. The buyer, who obtained trademarks from its foreign company, authorised the seller to affix the trade mark and the seller was to do so "as an agent" for and on behalf of the buyer and not on his own account. The Respondents M/s Cibatul Limited filed price list declaring the wholesale prices of the manufactured goods. The Assistant Collector revised the wholesale prices....
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....ose of valuation in Cibatul Ltd.'s case and eligibility of exemption Notification in Poona Bottling Ltd.'s case. In the present case, the levy is on rendering of services, in contrast to the aforesaid cases, where the taxable event is on the manufacture of goods and liability to discharge the duty is on the manufacturer of goods. Further, the question in the instant case is neither the assessment of beer, nor who the manufacturer is, but it is the service rendered by the Appellant in the production of the beer to cater to the marketing needs of M/s SKOL. Therefore, the ratio laid down in the aforesaid judgments cannot be made applicable to the present case. 27. It is the contention of the Appellant that in any service, consideration flows from the service receiver to the service provider, whereas in the present case, the appellants paid Rs. 5/- per case to M/s UBL, and M/s UBL paid service tax under the category of IPR service on the said amount, hence, it is not a service. At the first blush the argument sounds quite attractive but on deeper analysis will not sustain. The reason for not discharging service tax under Business Auxiliary Services as the amount paid by the Appellan....
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.... the value of such inputs; and (c) where the service provider also manufactures or processes alcoholic beverages, on his or her own account or in a manner or under an arrangement other than as mentioned aforesaid, he or she shall maintain separate accounts of receipt, production, inventory, despatches of goods as well as financial transactions relating thereto. 2. This notification shall come into force on the date of publication in the Gazette of India. Explanation.- For the purposes of this notification, the words or phrase 'input', or as the case may be, 'capital goods' shall have the meaning as is assigned to them under rule 2 of the Cenvat Credit Rules, 2004. [Notification No. 39/2009-S.T., dated 23-9-2009] 28. Therefore, the value of the services needs to be determined keeping in mind the aforesaid notification and the principles of valuation prescribed under Section 67 of the Finance Act and the Valuation Rules, 2006. The Adjudicating authority has erred in adopting the sale price of the Appellant. 29. The next issue for determination is the date of amalgamation/ merger of the Appellant's unit with M/s United Breweries Ltd. In the scheme of a....
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....ation cannot be 01.4.2010. In support, he has referred to the judgment of Shaw Wallace Distilleries Ltd case. Further, the learned A.R., referring to the judgment of Hon'ble Gujarat High Court in the case of M/s Indus Tower Ltd Vs State of Gujarat - 2017-TIOL-1845-HC-AHM-VAT, has submitted that the liability of service tax for the services rendered by the Appellant till the effective date cannot be obliterated merely because of the fact that amalgamation was deemed to have been effected from the appointed date. 33. The principle in this regard have been considered in the context of Income Tax Act,1961 by Hon'ble Supreme Court in Marshal & Sons Co. India Ltd.'s case(supra). Their Lordships at Para 14, observed as follows:- "14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. 1.1.1982. it is true that while sanctioning the scheme, it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of the case. If the Court so specifies a date, there is lit....
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....be 1.1.1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal Vs Bank of Upper India Ltd." 34. The Hon'ble Andhra Pradesh High Court in Jindal Strips Ltd.'s case, while considering the issue whether the merger of two companies was w.e.f. 01.04.1995 or from the effective date i.e. 19.09.1996, for the purpose of demand of sales tax/VAT, following the ratio laid down by Hon'ble Supreme Court in Marshal Sons & Co.'s case, held that while approving the scheme if the Court has not fixed any specific date as the effective date, then the date agreed upon by the parties would be the effective date of amalgamation. 35. This Tribunal in the case of ITC Hotels Ltd.'s case (supra) was confronted with the question whether the amalgamation of M/s ITC Hotels Ltd and M/s Ansal Hotels Ltd with the parent company M/s ITC Ltd. was as on 01.04.2004, i.e. the appointed date as per the Amalgamation scheme duly approved by the Hon'ble High Courts or the effective date of amalgamation, when the application filed with Registrar of companies that is 23.03.2005. Following the judgment of Hon'ble Supreme Court in Marshall Sons & Co. Ltd.'s case, it is held that the date of am....
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....ucted by the transferor company on or before the effective date will not be affected by the scheme of amalgamation. However, we find that such clause stands incorrectly interpreted by the learned DR. A reading of the above clause is reflective of the fact that the action of the transferor company on or before the effective date shall be deemed to have been done and executed on behalf of the transferee company. As such, it is clear that the said clause supports the respondent's stand that any business conducted by the respondents is to be held as having been conducted on behalf of the transferee company. As such, the service tax provided to the ITC Ltd. and Ansal Hotels Ltd. have to be considered as having been provided on behalf of the transferee company viz. ITC. Ltd., in which case, no service tax liability would arise against the service provider." 36. Subsequently, this Tribunal, in Usha International Ltd.'s case, have considered all the aforesaid three judgments. The facts leading to the issue before the Tribunal was that a refund claim of Rs. 84,76,586/- of service tax paid on royalty paid by the transferee company Usha International Ltd to M/s Joy Engineering Ltd, the tra....
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....y referred to the recent judgment of Hon'ble Gujarat High Court in Indus Tower Ltd.'s case. In the said case a writ petition was filed under Article 226 of Constitution of India with a prayer seeking declaration of Section 52 of GVAT Act 2003 as ultra vires to the Constitution of India. Their Lordships, distinguishing the judgment of Hon'ble Supreme Court in Marshall Sons & Co. Ltd case, observed as follows:- "21. The decision of the Hon'ble Supreme Court in the case of Marshall Sons & Company Limited V. ITO (supra) is concerned, their cannot be any dispute with respect to the proposition of law laid down by the Apex Court, however, the same shall not be applicable to the facts of the case on hand; more particularly, considering Section 52 of the GVAT Act. As observed hereinabove, neither Section 52 of the GVAT Act cannot be said to be an encroachment upon the powers of the Union Legislation, as envisaged under Section 246 of the Constitution nor the same can be said to be in conflict with the provisions of the Companies Act, 1956. Therefore, the decision of Hon'ble Supreme Court in the case of State of West Bengal & Ors Vs Committee for Protection of Democratic Rights, We....