TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1527
X X X X Extracts X X X X
X X X X Extracts X X X X
....y narrate the facts. The appellant is a bottling plant engaged in the manufacture of Pepsi brand products, such as Pepsi, Mirinda, Mountain Dew, 7 UP, Slice and Aquafina (packed drinking water). The appellant purchases concentrates, which is a raw material for the aerated drinks, from M/s. Pepsi Foods Private Limited [Pepsi Foods]. The concentrate is diluted, bottled and sold under the brand names owned by Pepsico India Holiday (P) [Pepsico]. The appellant is also engaged in the trading of Pepsi brand products which are purchased from Pepsico. 3. On the expiry of the earlier Trademark License Agreement dated 01.12.2000, a fresh "Bottling Appointment and Trademark License Agreement dated 01.08.2011 [the Agreement] was executed under which Pepsico, Inc (a Corporation Incorporated in the United States of America) granted the appellant the license to use the trademarks. In the said Agreement, Pepsico, INC is referred to as 'Company'; Pepsi Foods is referred to as "PFL"; and the appellant is referred to as the 'bottler'. The relevant clauses of the Agreement are reproduced below: "2. xxxxxxxxxx. The Bottler accepts the Appointment upon the terms herein contained and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... such signage as may be specified by the Company from time to time." 4. It would be seen from the aforesaid clauses of the Agreement that the appellant was required to take all steps necessary to promote and enhance the visibility and goodwill of the trademark, and in particular the appellant had also to maximize the sales and increase the beverage's share of market. 5. The appellant received incentives from Pepsi Foods under the head 'net incentive' and 'support and other receipts' for advertising, promoting and marketing the trademark. 6. According to the department, service tax should have been discharged by the appellant on the said amount received from Pepsi Foods under 'business auxiliary service' [BAS] as defined under section 65(19) of the Finance Act, 1994 [the Finance Act], and made taxable w.e.f. 01.07.2003 under section 65 (105)(zzb) of the Finance Act. 7. Accordingly, for the period April 2011 to January 2012, the department issued a show cause notice dated 17.04.2012 to the appellant. The main allegation in the show cause notice is that by advertising, promoting and marketing the trade mark, the appellant also promoted the sale of 'concentrates' produced a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ropriate rate as specified under Section 66 of the said Act. xxxxxxxxxx. 7. From the (Annexure-A) submitted by the Noticee, it appears that the Noticee has received an amount of Rs. 14,16,764/- in form of incentive support from M/s. PFL during the period April 2011 to Jan-2012 on which Service Tax amounting to Rs. 1,45,928/- (including Education Cess) is recoverable from the Noticee as detailed in Annexure-B to this show cause notice." (emphasis supplied) 8. The adjudicating authority confirmed the demand and the appeal filed by the appellant before the Commissioner (Appeals) was dismissed by order dated 03.02.2015. The relevant portion of the order of the Commissioner (Appeals) is reproduced below: "7.3 xxxxxxxxx. So, the first and most important question in this issue is being answered in the affirmative - That the appellant is promoting the products, brand and trademark of only PFL. The second aspect which proves that the activities undertaken by the appellant are ultimately benefiting and increasing the earnings of PFL is that the concentrate for bottling the drinks has to be procured/ purchased from only M/s PFL. So, in a way, the sales promotiona....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led by the appellant in SMV Beverages Pvt. Ltd. vs. Commissioner of Central Excise, Nagpur [2017-TIOL-1150-CESTAT-MUM]. The relevant portions of the decision of the Tribunal are reproduced below: "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 maximize the sales and to increase the beverages 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bench are as follows: "4.3 In our view, Hon'ble Bombay High Court has clearly stated the law on subject that sales promotion activities in relation to marketing and sale of the aerated water and similar products enhance the marketability of the concentrate manufactured and sold by the PFL to the appellant. xxxxxxxxxx 4.5 We have no reason to disagree with the findings recorded by the Commissioner (Appeals), in view of the decision of the Hon'ble Bombay High Court holding that the activities of the sale promotion undertaken by the Appellant, do promote the sale of the concentrate of the PFL, the Trademark and goodwill of the PFL. 4.6 It is not the case of the appellant that the consideration which have been accounted by them as "Net Incentive" and "Support and other receipt", are in any way incidental to purchase of the concentrate of PFL by the Appellant, but the same have been received by them for various specific purposes/ activities undertaken by them which promote the sale of concentrate of PFL and enhance the visibility and goodwill of the Brand name owned by PFL. (refer clause 10(b) and 10(d) of the agreement). In our view these a definite ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l to principal basis and, therefore, no service element was involved. This has also been clarified by the Board in the Circular dated 23.02.2009. 13. Shri V. Sridharan, learned senior counsel appearing for the intervenor, assisted by Shri Jay Chhadha, Shri Aditya Jain and Ms. Shambhavi Dewalkar, contended that: (i) Brand Promotion service was made taxable w.e.f. 01.07.2010 by section 65(105)(zzzzq) and introduction of a new entry and inclusion of certain services in that entry would presuppose that there was no earlier entry covering the said service. The appellant, therefore, did not render BAS; (ii) Reimbursement of advertisement / promotional expenditure is not a consideration for service. The decision of the Bombay High Court in Coca Cola relates to denial of CENVAT credit on advertisement expenses, which are included in the assessable value for payment of excise duty. The said decision would, therefore, not be applicable in the present case; (iii) Division Benches of the Tribunal in the following identical matters, after considering the judgment of the Bombay High Court in Coca Cola, have held that BAS would not be provided in such a case: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....manufacture of aerated water. Thus, the definition of BAS would not cover the transaction. 17. When the present appeal came up for hearing, the Division Bench referred the matter to a Larger Bench of the Tribunal in view of the judgment of the Bombay High Court in Coca Cola. 18. It would, therefore, be appropriate to examine the judgment of the Bombay High Court in Coca Cola. 19. The question that arose for consideration before the Bombay High Court in Coca Cola was whether the appellant that was engaged in the manufacture of 'concentrates' would be eligible to avail credit of the service-tax paid on the advertising, sales promotion and market research services and could utilize such credit towards payment of excise duty on the manufacture of 'concentrates'. The two questions on which the appeal was admitted are as follows: "(a) Whether services of advertising and marketing procured by the Appellants in respect of advertisements for aerated waters are covered by the definition of the words "input services" as defined in Rule 2(l) of the CENVAT Credit Rules, 2004, when admittedly the Appellants manufacture concentrates exclusively used for the manufacture of the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elating to business falls within the definition of 'input service' provided there is a relation between the manufacturer of concentrate and the activity. One of the five categories contained in the definition of 'input service', in so far as a manufacturer is concerned, would be any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and if an assessee can satisfy this limb, then credit of the input service would be available. As an illustration, the Bombay High Court pointed out that input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal. The Bombay High Court ultimately held: "44. Having thus arrived at the conclusion on the meaning of the expression of input services and that manufacturer can avail of the credit of the services tax paid by him for payment of CENVAT duty, the question referred for our considerati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eting the goods produced or provided by or belonging to the client i.e. Pepsi Foods. The goods that are produced by Pepsi Foods are 'concentrates' and not 'aerated water', which is manufactured by the appellant. The promotion schemes floated by the appellant do not relate to 'concentrate' at all. 27. The decision of the Bombay High Court in Coca Cola would, therefore, not be relevant to the issue involved in the present appeal. 28. It may now be useful to refer to some of the decisions of the Tribunal in identical matters where the judgment of the Bombay High Court in Coca Cola in the context of BAS has been considered and distinguished. 29. In Superior Drinks, the appellant was engaged in bottling and marketing of beverages under the brand name Coca Cola, Kinley and Sprite. During the course of investigation and scrutiny of records, it was found that the appellant had received certain amount from Coca Cola under the head 'marketing support receipt'. The department sought to subject this amount to service tax under BAS for the period up to 01.07.2012. The demand was proposed treating this amount received by the appellant towards undertaking sale, marketing and promotion of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use. Hence these are left out from our consideration in subsequent paragraphs. 5.14 The phrase "any activity carried out by a person for another", is very clear that the activity sought to be taxed, should be the activity carried out by one person for the another person. Thus any activity which has been undertaken by a person on his own account for himself cannot be said to be covered by the said phrase even if this activity is undertaken by the person with the financial assistance/ support of other person either partially or completely. xxxxxxxxxx. 5.15 In the present case the appellants were undertaking the marketing and sales promotion activity on their own account, Coca Cola India was only providing certain financial assistance in undertaking such activity. The activity undertaken were not performed by the appellant for Coca Cola India, but was performed for themselves. Since no activity has been performed by the appellant for Coca Cola India, we are of view that mere receipt of amounts under the head "Market Support Received" will (not) qualify them as "service" under Section 65B(44). 5.16 We do not find any merits in the order of the Commissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Superior Drinks. xxxxxxxxxx" (emphasis supplied) 33. In Ludhana Beverages, the decision of the Tribunal in Kandhari Beverages was followed. 34. The decision of the Tribunal in Beltek Canadian Water that was decided on 30.01.2024 now needs to be examined. This decision was rendered after the reference was made by the Division Bench. The appellant was engaged in the manufacture of packaged drinking water. It was noticed that the appellant had received incentives from M/s. Pepsi Foods to promote the sales of the goods of Pepsi brand, but it had not paid service tax. The issue, therefore, that arose before the Tribunal was whether the sale incentive, advertisement and publicity charges received by the appellant could be subjected to service tax under BAS. The Tribunal followed its earlier decisions in Narmada Drinks (P) Ltd. vs. Commissioner of Central Excise, Raipur [2017 (5) G.S.T.L. 369 (Tri. - Del.)]; Commissioner of C. Ex. & S.T., Lucknow vs. Brindavan Bottlers Ltd. [2019 (27) G.S.T.L. 354 (Tri. - All.)]; and SMV Beverages and held: "4.8 In view of the decisions as above we do not find any merits in the impugned order demanding the service tax by classifying t....