TaxTMI 
TaxTMI 
TaxTMI 
2024 (2) TMI 139
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.... 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 amounting to Rs. 70,18,810/- on the total amount of Rs.7,28,95,102/- received as inc....
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....as 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/ jars to the customer is for promotion of their own sale and not the sale of Pepsi exclusively. * Reliance is placed on the decision in the case of Narmada Drinks (P) Lt [2017 (5) GSTL....
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....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/closures. (iv) Franchisee in manufacturing, packaging, selling and distributing Aquafina Bulk Packaged drinking water shall ensure that all other materials like jars, labels, caps and shrink sleeve etc. shall be of the quality, standard and spe....
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.... 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 marketing schemes and the amount of Rs. 3,44,31,998/- have been received by them against the said schemes. It is seen that such schemes includes providing the dispenser, waiver of jar security, sale executive incentives, free water jars, other incentives and jar breakage value etc. On going throu....
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.... 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 the data provided by the party the calculation chart of Service Tax liability (on the basis of reverse calculation of Service Tax) in respect of gross amount as incentive received by the party is detailed as under: Financial Year Total incentive including Service Tax Assessable Value excluding service tax Service Tax Edu. Cess HSEC Total Tax 2007-08 4337088 3859993 463199 9264....
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....es 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 conclude that it is likely to be under "Promotion or marketing or sale of goods produced or service provided by the client"; we note that no investigation has been undertaken by Revenue into the reasons for which appellants have received the payments. Hence, it is not very clear why the appellant has received the said amounts from M/s. Coca Cola. However, the Show Cause Notice, in Para 6.2, has stated that the amounts have been received from the brand owners to promote and market the brands of the brand owners. 10. When we look at the clause (i) the de....
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....ut 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 maximize the sales and to increase the beverage's share of market. Both the clauses when scrutinized in depth, do not indicate that the main appellant is required to promote or market or sale of goods produced or provided or belonging to PFL. In the case in hand, PFL is only producing and selling concentrate to the main appellant for converting into aerated water. The adjudicating authority's findings that the concentrates are belonging to PFL, also does not cut the ice, inasmuch as the said concentrate is sold on payment of excise duty to the main appellant, which would indicate that o....