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2015 (4) TMI 252 - CESTAT NEW DELHI

2015 (4) TMI 252 - CESTAT NEW DELHI - 2015 (40) S.T.R. 547 (Tri. - Del.) - Demand of service tax - Various services - Travelling expenses component of foreign currency expenditure - Held that:- In spite of noting that these expenses were on foreign trips of employees, the adjudicating authority states "but still no service tax has been paid by the party" without even mentioning for which taxable service. This is shoddy. In any case, the reimbursements made towards travelling expenses are not lia .....

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penses at their hands, which is also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have generated an income for them and not expenses.

Advertising and Marketing Expenses in Foreign Currency - The appellants claimed and submitted details showing that ou .....

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6 is no longer res integra and, therefore, idle parade of familiar judicial pronouncements in this regard (like Indian National Shipowners Assn Vs. Union of India) [2008 (12) TMI 41 - BOMBAY HIGH COURT] is avoidable - Appellant also asserted that they had not paid service tax on such foreign exchange expenses shown under this head which related to purchase of materials. In the absence of any evidence to the contrary, as the onus lies on the Department, it will have to be held that Revenue is not .....

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erely reimbursed a part of marketing expenses. On the other hand, the appellants have been able to show that these amounts were actually expenses at their hands, which is also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have generated an income for them and not .....

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ome from Lease of Property". This is nothing but a cavalier and careless attitude on full display. The appellants actually showed with reference to their profit and loss account that these were their expenses, which were incurred on leasing the immovable property for their use. Thus they were the recipient of the said service and therefore the question of they being liable to pay service tax is preposterous; it not being a case of import of service inviting reverse charge mechanism.

I .....

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everely impinge upon the public's trust in the public authorities and for that reason a public authority displaying such egregiously irresponsible conduct and that too while performing quasi-judicial functions deserves to the put to costs. Accordingly, we set aside the impugned order - Costs imposed - Decided in favour of assessee. - Application No.ST/STAY/54506/2013-CU[DB], Appeal No. ST/56951/2013-CU [DB] - Final Order No. ST/A/50716/2015-CU(DB) - Dated:- 18-3-2015 - G. Raghuram And R. K. Sing .....

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44,582/- respectively along with interests and penalties. The first Show Cause Notice dated 21.10.2010 covered the period of 2005-06 to 2009-20 and the subsequent two Show Cause Notices covered the periods of 2010-11 and 2011-12. As the issues involved were identical, the adjudicating authority issued a common (impugned) order. 2. In respect of first Show Cause Notice confirming demand of ₹ 60,11,37,341/- the computation is summarised in para - 5 of the impugned order, which is reproduced .....

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23,60,306 13,11,404 79,02,382 Income Shown by Coca-Cola India Pvt. Ltd. In their Balance Sheets Head/ Year 2005-06 2006-07 2007-08 2008-09 2009-10 Remarks / Total Marketing Support (including Marketing, Support, Advertising and Sales 16,61,713,559 59,93,85,763 65,52,43,068 90,20,73,601 1,45,87,95,535 Provided to CCIPL & HCEMPL) Service Provided NIL NIL NIL NIL 4,74,11,597 Income from Lease of Property Taxable w.e.f. 1.06.07 under IPR services 30,60,000 29,37,022 65,37,311 87,89,420 Income f .....

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2.36% 12.36% 10.30% Amt. Of S. Tax Payable 16,98,69,291 7,58,16,645 8,31,29,940 11,48,33.266 15,74,88,199 60,11,37,341 We shall take up each component of the impugned demand, analysing the contentions of the appellants vis-a-vis the grounds adopted by the adjudicating authority for confirming the same as the ld. Departmental Representative merely reiterated the grounds contained in the impugned order simply adding that the case may be remanded. 3. With regard to "travelling expenses" c .....

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for business purposes. If such travels are undertaken for business purposes then no service tax will get attracted as there is no service provider in such cases. However no reason has been given for levy of service tax on travelling expenses. We submit that under the reverse charge method in case of foreign service payments only when the company avails some service from a foreign service provider and pays for such service in foreign currency then under Section 66A of the Service Tax Law, the co .....

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7. M/s. CCIPL vide their submissions interalia submitted in respect of the said service that with regard to travelling expenses, we submit that it has been undertaken for business purposes. If such travels are undertaken for business purposes then no service tax will get attracted as there is no service provider in such cases. However no reason has been given for levy of service tax on travelling expenses. We submit that under the reverse charge method in case of foreign service payments only wh .....

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ority's "analysis" in para-67 is nothing more than a verbatim reproduction of appellants' submission quoted earlier and no finding is recorded about the taxability. Yet the demand in respect of such expenses is confirmed. A reference to such confirmation is contained in paras 51, 52 and 53 of the impugned order, which are quoted below:- "51. The party vide their letter dated 22.04.2010, submitted that these expenses are incurred for the employees for the company who travel .....

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ervice tax has been paid by the party. 53. I find that the figures were taken from the documents adduced by the party. Further, it has shown under the column 'income' side of the Balance Sheet as such the party is liable to pay the demanded service tax." Thus, in spite of noting that these expenses were on foreign trips of employees, the adjudicating authority states "but still no service tax has been paid by the party" without even mentioning for which taxable service. Th .....

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rd to Advertising and marketing expenses, we humbly submit that wherever tax is payable on such advertising and reverse charging expenses, we have paid the tax under reverse charge method. We crave leave to produce documents in this regard for which 30 days' time may be granted to us. Further we submit in terms of Section 70 of the Act that, there is no failure on our part to furnish a return or to pay the tax as provided in the Act as there is no obligation or liability on our part to submi .....

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by us to third parties. In these cases, the best that can be alleged against us is that we are only a service recipient and not a service provider. Hence calling us to register in respect of the above services, even though we are a service recipient, is contrary to the provisions law and hence unsustainable." The adjudicating authority in his 'Discussions and Findings' relating to this component of the impugned demand, in paras 68 to 79 observed as under:- "68. M/s. CCIPL vide .....

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e tax as provided in the Act as there is no obligation or liability on our part to submit any such return or pay tax in respect of the above activities, 70. Further the Department is erroneously calling upon us to register ourselves under "Renting of immovable property Act" and under "Supply of Tangible Goods for use in India" and under "Business Auxiliary services" whereas in all the above cases quoted in the Show Cause Notice we have paid money to the Indian resid .....

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lowing explanation in Rule 6 of the Rules, which is as under: "Explanation:- For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called 'Suspense account' or by any other name, in the books of account of a person liable to pay service tax."; .....

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not have any office in India, the person receiving taxable service in India"; 73. This Rule 2(1)(d)(iv) was amended by the Service Tax (Fifth Amendment) Rules, 2005 under Notification No.23/2005-ST dt.7.6.05, w.e.f. 16.6.05 when it read as under: 2(1) in these rules, unless context otherwise requires, (d) person liable for paying the service tax means, (iv) "in relation to any taxable service provided or to be provided by a person, who has established a business or has a fixed establi .....

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No. 10/2006 dated 19.4.06 read as under:- 2(1) In these rules, unless context otherwise requires, (d) person liable for paying the service tax means, (iv) "in relation to any taxable service provided or to be provided by a person from a country other than India and received by any person in India under Section 66A of the Act, recipient of such service;" 75. Section 66A has also been inserted in the Act, w.e.f. 3.4.06 read as under;- 66A.(1) Where any service specified in clause (105) o .....

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e taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly alt the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both .....

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ction. 76. CEBC vide Circular F.No.275/7/2010-CX 8A dated 30.06.2010 provides that: i) in case of taxable services provided by a non resident, not having office/establishment in India, and received in India, the service tax liability arises w.e.f. 01.01.05, on reverse charge basis on the recipient of service in India. ii) in case of taxable service received outside India by a person, who is a resident in India or has a place of business/ establishment in India, the service tax liability arises w .....

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dgement, which stipulates that where an assessee; (c) fails to furnish the return under section 70; d) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made there under, the Central excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into all the relevant material which is available or which he has gathered shall by an order in writing, after giving the perso .....

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nded period proviso is invokable for the reasons stated supra" As is evident, paras 68, 69 and 70 are verbatim reproduction of the appellants' submissions, paras 71 and 76 are essentially quotes from CBEC circulars and paras 72, 73, 74, 75, 77 and 78 are the reproduction of legal provision. Thus the "analysis" is contained only in para 79 which is anything but analysis and indeed to call it "analysis" is an embarrassment to that word itself. In this regard we observe .....

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verse charge mechanism" did not have any legal basis prior to 18.04.2006 is no longer res integra and therefore idle parade of familiar judicial pronouncements in this regard (like Indian National Shipowners Assn Vs. Union of India [2009 (13) STR 235 (Bomb) / 2010 (17) STR 557 (SC)]) is avoidable. They also asserted that they had not paid service tax on such foreign exchange expenses shown under this head which related to purchase of materials. In the absence of any evidence to the contrary .....

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pport (including marketing support, advertising and sales promotion) M/s. CCIPL vide their submissions interalia submitted in respect of the said service that in the second part of the statement column 1 relates to Marketing support (including marketing support, advertising and sales promotion). This figure has been taken from the schedule to the Balance Sheet for the previous year which is appearing under the heading "Transactions with related parties". This is erroneously treated as .....

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pective territories. As a common practice in any industry, to increase the sale of their final products viz., beverages, the bottlers carry out various types of marketing activities for increasing and sustaining the sale of their products viz., beverages. The business of the bottler and the business of Coca-Cola India Pvt. Ltd. Is inextricably linked to each other as any increase in the sale of beverages automatically results in increase in the sale of concentrates, which is an essential ingredi .....

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better understanding of the business transactions we wish to submit the following:- 42. Our bottlers purchase concentrate from Coca-Cola India Pvt. Ltd. (CCIPL), and use the concentrate for manufacture of beverages. The sale or purchase of concentrate is on principal to principal basis and the bottlers do not render any service to CCIPL. The bottlers do not promote the sale of CCIPL's products viz., concentrate as the concentrates cannot be sold to any ultimate consumer and can only be used .....

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id by them. The bottlers sell the goods to various distributors and realize the sale proceeds. They have the ownership of the goods viz., beverages manufactured by them. 44. The "marketing support" appearing in the profit and loss account represents the discounts/share of cost borne by us in relation to marketing expenses incurred by the bottlers and since bottlers did not provide any service, they have not charged any fees for the same, and accordingly no service tax paid by them (mea .....

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y an expense in the hands of the company. Hence no service tax can be levied in the hands of CCIPL The amounts have been taken from the schedules to the Balance sheets which discloses "transactions between related parties". This does not automatically mean that CCIPL has received the money. It only simply states that CCIPL and HCCBPL are related parties in respect of that transaction. CCIPL has no relationship of a service provider and client viz., the bottlers in India to whom the amo .....

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ound alone and we are not liable to Service tax under "Business Auxiliary Service" as alleged in the SCN." To the appellants' above submissions, the adjudicating authority records his analysis and findings in para 47 of the impugned order as under- "47. Whereas, I find that on perusal of a copy of the Trial balance for the period 2008-09, Ledger account of M/s. Hindustan Coca Cola Beverages Pvt Ltd., regarding the payment of service tax on Market Support the party submit .....

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efore, liable to pay service tax." It is evident that the adjudicating authority has not undertaken any analysis of the appellants' submissions and merely records a fiat that the appellants are liable to pay service tax in spite of taking note of the appellants' submissions that they did not provide such services and merely reimbursed a part of marketing expenses. On the other hand, the appellants have been able to show that these amounts were actually expenses at their hands, which .....

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authority in para 47 of the impugned order records the appellants' submissions "that this amount represents the outstanding sale price to be recovered from M/s. HCCBPL towards sale of concentrate and not for any service. Further the purpose of corporate guarantees given by M/s. CCIPL and M/s. HCCBPL, the appellants submit that these guarantees have been given against the income tax demands by the ITAT. We find that the adjudicating authority does not controvert these submissions in any .....

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r the taws of USA and situated at Atlanta, Georgia in United States of America. CCIPL has been engaged by IAI vide an agreement dated 14th May, 2009 to conduct corporate audits of various international subsidiaries of The Coca-Cola Company, USA. These international subsidiaries are situated in various foreign countries as well as in India. The order for these services is placed by IAI and the money for rendering such services are received in US dollars from IAI. The services had been rendered ou .....

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mbursements were received from HCCBPL, they have paid service tax along with interest for the years 2009-10, 2010-11 and 2011-12. Regarding this component of the impugned demand, the adjudicating authority after recording the submissions of the appellants in para 54 quoted above, writes the following three paras (Nos.55, 56, & 57) which are reproduced below:- "55. Whereas, the party vide their letter dated 21.09.10, however, submitted the details of Advertising and Sales Promotion for t .....

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ere made by the party for the services received by the party during the impugned period on which, the party was required to pay service tax under reverse charge mechanism. 57. Further, I find that as brought out in the impugned Show Cause Notice, the services of management consultancy were brought into Service Tax net w.e.f. 16.10.98 and Section 65(65) of the Act, as it stood prior to 1-05-06, defined the term 'management consultant' as follows: 'Management consultant means any perso .....

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who is engaged in providing any service, either directly or indirectly, in connection with the management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology or resources or other similar areas of management." And whereas, subsection 65(90)(r) .....

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re totally irrelevant vis-a-vis the contents of para 54 and the appellants contentions regarding the component of impugned demand relating to "Service Provided" are not even adverted to, leave alone analysed and findings recorded thereon. Indeed, in view of the contents of the above-quoted para 54 and in the absence of any evidence to the contrary, the appellants' contentions in this regard are in no way untenable. In the case of Cox and Kings India Ltd. Vs. CST, Delhi [2014 (35) S .....

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interalia submitted in respect of the said service that again the Department has erroneously construed this as Income from lease property whereas this is an expense in the hands of CCIPL. "The company has taken various warehouse premises under operating lease agreements. These are cancellable and are renewable by mutual consent on mutually agreed terms. Lease payments for the year, included under Rent charges, amounting to ₹ 90,12,787/- (previous year 87,89,420)". It is clear fro .....

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roperty owned by CCIPL or leased/sub-leased by CCIPL to any other company from where any income from lease of property is earned by the company." Having thus recorded the appellants' submissions, the adjudicating authority in subsequent paras (60, 61, 62, 63 and 64) merely reproduced the legal definitions relating to "renting of immovable property service" "supply of tangible goods for use in India" and "Business Auxiliary Service" and thereafter simply mov .....

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ir use. Thus they were the recipient of the said service and therefore the question of they being liable to pay service tax is preposterous; it not being a case of import of service inviting reverse charge mechanism. 8. Similarly, with regard to the component of the impugned demand under "Income from Lease of Vehicles", the appellants made the following submissions as duly recorded in paras 65 & 66 (in the "Discussions and Finding" portion of the adjudication order), whic .....

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rms. Lease payments for the year, included under Rent charges are ₹ 19,90,187/- (previous year 12,83,012). it is clear from the above notes that it is an expense in the hands of the company whereas it is treated erroneously as income of the company by the Department. Similar notes are appearing for the balance years under dispute. 66. CCIPL has taken vehicles on lease for its employees and for its business purposes from various operators. However, this figure has been construed erroneously .....

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inviting reverse charge mechanism. 9. In the entire impugned order, the only paragraph dealing with the sustainability of invocation of extended period is paragraph 79 which (although reproduced earlier) is again reproduced below:- ''79. I find that the demand was raised on the basis of documents submitted by the party as such it cannot be construed as erroneous. The impugned SCNs are elaborative, categorical and cover all the Rules, Section, etc. The service tax amount payable is right .....

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se Notice must contain an averment to that effect pointing out specifically as to which of the various commissions and omissions stated in the proviso to Section 11A(1) of the Central Excise and Salt Act, 1944 had been committed by assessee and adjudicating authority must specifically deal with assessee's contention in rebuttal thereof. Seen in the light of the Supreme Court rulings in this regard, the adjudicating authority has obviously failed to meet even the minimum requirements necessar .....

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nce with the provisions of this Chapter or rules made there under, the Central excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into all the relevant material which is available or which he has gathered shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgement and determine the sum payable by the assessee .....

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aking regarding the methodology/reasons/grounds based on which he arrived at the "best judgement" figures adopted by him for levy of service tax. Obviously, the adjudicating authority seems to equate "best judgement" with "arbitrary judgement" little realising that arbitrariness is an anathema in law. The adjudicating authority is not even sure whether Section 72 is invokable as is evident from the word "appears" appearing the first sentence of para 78 quo .....

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