TMI Blog2013 (8) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ges (Mfrg . & Mktg.) Corpn., it has been held that on analysis of the agreement between the appellant (RSBCL) and the manufacturers / distilleries, (illustrated by the agreement dated 31.03.2008 with M/s Khasa Distillery Company, Prop. Bhagat Industrial Corporation Limited), the conclusion that the ownership/property in liquor continues with the distilleries and has not passed to the appellant, is inescapable and compelling. The several clauses of the agreement clearly demonstrate this variety. On analysis of the several clauses of the agreement (referred to above), it is clear that the appellant was never the owner of the liquor nor had title in the liquor supplied to it. It was merely acting as the consignee of the goods belonging to the supplier/distilleries. Within the framework of the agreements, considered in the context of the taxable BAS, as defined in Sections 65 (19) read with 65(105) (zzb) of the Act, the conclusion is uncontestable that the appellant was rendering the taxable BAS since the appellant was clearly marketing and providing services in relation to sale of goods (IMFL , Beer etc.) produced / belonging to the distilleries – Decided against the Assessee. Exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, it is mandatory for all manufacturers/distilleries/suppliers to sell liquor in the State only through the canalising agency, namely the appellant. 3. In the admitted factual scenario the appellant is not registered as a service tax provider; had not filed returns of service tax; nor had remitted service tax. 4. Intelligence gathered by Revenue revealed that the appellant collected a commission of Rs . 45,06,33,440/- during the period 01.02.2005 to 31.08.2007 but failed to remit service tax amounting to Rs.5 ,21,25,843 /-. Consequently Revenue addressed letter dated 23.08.2007 and 16.11.2007 calling upon the appellant to produce the relevant documents/information. After some intermediary correspondence and furnishing of information by the appellant, on 01.11.2007 the appellant provided depot wise sale details of liquor and commission earned by the appellant, to Revenue. On the basis of information received, Revenue assumed that the appellant had provided the taxable Business Auxiliary Service (BAS) to manufacturers of liquor/distilleries and issued the show cause notice dated 11.07.2008, in substance alleging that the appellant had provided the taxable BAS and had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting authority proceeded on the basis that the appellant had provided BAS, a taxable service to the manufacturers / distilleries. As already noticed the claim of the appellant is that since it had purchased liquor from manufacturers or distilleries and had thus become the owner of the liquor, if any service was provided it was service to itself and not to another and thus no service tax liability arises. 7. It is necessary in the circumstances to analyses relevant provisions of the terms and conditions of the agreements between the appellant and the manufacturers of liquor/ distilleries. The appellant entered into several agreements with different distilleries. Shri Garg has referred to an agreement dated 31.03.2005 between the appellant and M/s Khasa Distillery Company, Prop. Bhagat Industrial Corporation Limited as an agreement illustrative of the several agreements entered into between the appellant and several distilleries. We therefore proceed to analyse the relevant terms and conditions of the agreement dated 31.03.2005 for determination of the claim of the appellant as to immunity to the liability to service tax. Relevant provisions of the agreement dated 31.03.2005 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to store the liquor delivered for distribution for a period of 90 days without charging any storage fee. If the liquor is not disposed of within the period, the appellant would levy the specified demurrage charges by deducting the same from any payment due to the manufacturer. Clause 7.2 authorises the appellant to dispose of liquor lying unsold for 120 days and that the difference between the price of delivery and the amount realised by the appellant on such sale of the liquor shall be borne by the manufacturer. Clause 7.3 states that stock of beer lying unsold in the depot of the appellant for a period in excess of six months from the date of bottling, declared unfit for human consumption shall be destroyed by the appellant and no payment shall be made in respect of such stock, subject to review of the storage time (clause 7.4). Clause 7.5 specifies that any abnormal storage loss shall be borne and made good by the manufacturer. (l) Clauses 8 to 10 set out housekeeping provisions relating to Inspection and Supervision, Compliance with Laws ; and Force Majeure circumstances. (m) Clauses 11 to 14 similarly deal with Arbitration, Indemnity; Jurisdiction; and Liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal held that a clause in the agreement, between the Karnataka Corporation and the concerned distillery pertaining to demurrage charges leviable by the Karnataka Corporation (similar to a clause in this case) could not be considered as a charge collected for a storage of goods, since once the Corporation purchases the goods, ownership no longer vests with the manufacturer; and that even if it is considered that the Karnataka Corporation was rendering the services of storage such service is only in respect of goods owned by itself, for which no service tax could be levied. (b) The decision of this Tribunal in Chattisgarh State Beverages Corpn. proceeded on an identical assumption in respect of Revenue's claim for service tax. Revenue claimed service tax from the Chattisgarh Corporation under the head "Clearing and Forwarding Agent Service". This Tribunal concluded that the Chattisgarh Corporation had purchased liquor in terms of the agreement with the distillery and sold the same to various licensee/dealers; that there are several restrictions on the trade; (in liquor); that the Corporation is a procurement agent for the State Government and was therefore rendering service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss to the Corporation; the sale in respect of the goods is not affected when the goods are received at the sale godown of the Corporation; that there is no sale in favour of the Corporation at the threshold; and further that the property in the goods continues in the manufacturers / distilleries. The Tribunal noticed that the adjudicating authority had concluded that supply of liquor received by the Kerala Corporation is to be treated only in the status of an agent of the distilleries till disposal. Despite the above and several other material on record the Tribunal (in para 17) recorded the conclusion that the sale of the liquor takes place on delivery of goods to the Corporation in terms of the contract; that supplies (of liquor) received are retained in the warehouse of the Corporation and are therefore the property of the Corporation. This conclusion as to ownership of liquor by the Corporation was the foundational basis for the eventual conclusion that the activities undertaken by the Corporation cannot be held to be services rendered to somebody else and therefore exigible to service tax. The Tribunal concluded that since the Kerala Corporation owned the goods on delivery by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso commend our acceptance. The appellant under the several terms and conditions of the agreement with manufacturers of liquor had clearly not inhered ownership of the liquor. It was merely providing services in relation to the sale of liquor to the distilleries which continue to have title to the liquor, though under a regulated regime covered by provisions of the Excise Act of the State. It is under the State legislative dispensation that appellant was conferred the monopoly and exclusive privilege of wholesale trade in liquor. Consequently, wholesale trade in liquor is authorised to the appellant under the license granted under the relevant State legislative provision. Whatever be the regulatory regime there could be no cause for any doubt or a bonafide belief that the appellant was rendering the taxable BAS to manufacturers of liquor by providing a service in relation to the sale of goods (liquor) produced by such distilleries/ manufacturers. Despite the clear obligation enjoined by unambiguous provisions of the Act, the appellant neither obtained registration as a taxable service provider; nor filed periodical returns nor remitted service tax as mandated by the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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