TaxTMI 
TaxTMI 
2024 (2) TMI 139
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....94. 3. I impose penalty of Rs.10,000/- (Rupees ten thousand only) or two hundred rupees for every day during which such failure continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance under Section 77 of Finance Act, 1994 4. I also impose penalty of Rs. 70,18,810/-(Rupees seventy lakhs eighteen thousand eight hundred and ten only) upon M/s Beltek Canadian Water Ltd.A-16, Hosiery Complex Phase-Il, Noida under Section 78 of the Finance Act,1994 2.1 Appellant is engaged in the manufacture of packaged drinking water and is registered with the Service Tax Department for providing the services namely Franchisee services and Transport of Goods by Road services 2.2 During the audit of the Appellant for the period Aug. 2008 to Dec. 2009 it was observed that the party had received incentive amounting to Rs 43,37,088/- and Rs. 84,51,321/- during the financial 2007-08 and 2008-09 respectively from M/s Pepsi Foods Pvt. Ltd. to promote the sales of the goods of Pepsi brand. 2.3 On scrutiny of the details provided by the appellant during enquiry ad investigation, it appears that they had not paid Service tax amo....
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.... 1994/ Rules ibid. 2.6 The show cause notice has been adjudicated as per trhye impugned order in para 1, above. Aggrieved Appellant has filed this appeal 3.1 We have heard Shri Atul Gupta and Shri Prakhar Shukla Advocates for the appellant and Shri Santosh Kumar, Authorized Representative for the revenue. 3.2 Arguing the appellant learned counsel submits: • The services provided by the appellant are not classifiable under the category of "business auxiliary services" and hence not liable to service tax. • Appellant is manufacturing and selling the goods under agreement dated 09.06.2003 with M/s Pepsi. They are paying Royalty to M/s Pepsi @ Rs 7.50 per jar of Aquafina Bulk Packaged Drinking Water. • Royalty is only paid as the goods are produced and they belong to the appellant. These are not produced or provided to them by M/s Pepsi. As appellant is not undertaking any activity of promotion of sale of the goods of M/s Pepsi, they do not fall under the category of "business auxiliary services" • In the impugned order it has been observed that the activity such as providing discount to the customer or providing dispenser/ j....
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....nt. They were under bonafide belief that no service tax is payable by them as the issue invoked interpretation of law. Lastly their submission is that since service tax itself is not payable by them therefore, interest and penalty is also not warranted. Before proceeding further in this case, it is important that the agreement dated 09.06.2003 entered into between the party and M/s PFPL is examined critically. The relevant portion of the agreement dated 09.06.2003 is produced as below:- (i) at all times the franchisee shall in manufacturing of Aquafina Bulk Packaged Drinking water meet the water purity standard following the guidelines in the Aquafina International Technical Reference manual and the Aquafina International implementation guide provided by PFPL as amended from time to time. (ii) permit PFPL's agent during working hours to inspect the facilities, equipment and materials to check operations and methods and to take samples of water and packaging material and finished products (iii) PFPL shall supply the caps/closures to the franchisee at the prevailing rate calculated in an open book format based on the caste of production of the caps....
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....si for their share of expenses and the payments received by the party from Pepsi were against the share of Pepsi in the expenses incurred by party. Further on going through the agreement it is also seen that the agreement is a franchisor- franchisee license regarding Intellectual Property Rights which states that the Pepsi will be entitled to charge royalty from the franchisee. The royalty will be charged @ Rs. 7.50 for each jar of Aquafina Bulk packaged drinking water produced by franchisee. However, there is no mention of any obligation of incentive received by the party from the Pepsi Thus, in view of the above, the party's reply that the amount received on account of expenses towards certain joint marketing schemes seems evasive and liable to be rejected. The total amount received by the party as incentives have been bifurcated by them into two parts. One is against achieving the sales target and the other is against various marketing schemes. But both the amounts have been received by the party against the sales and promotion of their goods which is moreover in the form of an incentive. The party in their defence have submitted that they have launched joint m....
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....ance, inventory management, evaluation or development of prospective customer or vendor, public relation services management or supervision, and includes services as a commission agent, but does not include any activity 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. It is seen from the above definition that the party's activities are well covered under Business Auxiliary Service and therefore liable to payment of service tax at appropriate rate. Based on th....
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....nues to supply the concentrate, which is used for manufacture of aerated product with the brand name of Coca Cola, any activity undertaken with the intention of promoting the brand name will also result in promotion of the sale of goods produced by the appellant. The Department has issued a Show Cause Notice and proceeded to confirm the demand of service tax on the basis of notice. During the course of audit of goods of accounts of the appellant; the appellant was found to have received certain amounts from M/s. Coca Cola variously described as "Sales Target Incentives" and "Advertisement and Publicity", etc. The SCN alleges that the appellant has received the aforesaid amount from the brand owners to promote and market the brands of the brand owners. Service Tax has been demanded by considering that such services fall under the category of "Business Auxiliary Service" defined under Section 65(105)(19). 9. BAS is an omnibus service covering within its fold various types of services. It has not been indicated either in the Show Cause Notice or Order-in-Original under which sub-clause the appellant's service is being charged to service tax. By process of elimination, we ....
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....t of such expenses from Coca-Cola Company Limited." 4.6 In case of SMV Beverages [2018 (17) G.S.T.L. 284 (Tri. - Mumbai)] Mumbai Bench held as follows: "8. The adjudicating authority has sought to tax the amounts received by the main appellant under category (i) or (ii) of the definition as reproduced herein above. For doing so, he has relied upon the PFL's Bottling Appointment and Trade Mark Licence Agreement entered into by the main appellant. 9. We have perused the agreement entered into by the main appellant with PFL and find that the entire agreement talks about the sale of concentrate to the main appellant and the conditions for bottling the said trade mark like Pepsi, Mirinda, 7-up etc. The said agreement also provides for rights of PFL to sell and distribute beverages in other areas by appointing various bottlers. We have specifically perused the clauses relied upon by the adjudicating authority which is 11(b) and (d). On perusal of the said clauses, we notice that it talks about the steps necessary to be taken by the main appellant to promote and enhance the visibility and goodwill of trademarks and in particular the main appellant shall endeavour to m....