TMI Blog2015 (4) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 out of the expenses on advertising service, for payments made to various advertising agencies abroad, they have paid the service tax under reverse charge mechanism along with interest for the period 2006-07 to 2011-12. They had not paid service tax upto 2005-06 on such payments as the reverse charge mechanism came into effect with the introduction of Section 66A in the Finance Act, 1994 with effect from 18.04.2006. That the "reverse 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) [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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly non-speaking, non-reasoned, arbitrary and cavalier while passing the impugned order. Non-application of mind (on the part of the adjudicating authority) is indeed writ bold and large across the impugned order. Such orders adversely and severely 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. Singh,JJ. For the Appellants : Shri Vikram Nankani, Sr Adv., Ms Sonu Bhatnagar, Shri Alok Yadav, Shri Somnath Shukla, Advs. For the Respondent : Shri Govind Dixit, DR ORDER Per: R K Singh: The appellants have filed this appeal along with stay application against the Order-in-Original No.33-35/GB/2013, dated 28.02.2013 issued in respect of 3 Show Cause Notices dated 21.10.2010, 21.10.2010 and 18.10.2010, confirming service tax demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice 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 from Lease of Vehicles Taxable w.e.f . 16.05.08 under 'Supply of Tangible Goods for use in India' 13,64,496 12,83,012 Total Taxable Value 1,66,17,13.559 60,24,45,763 65,81,80,090 90,99,75,408 1,51,62,79,564 5,34,85,94,384 Rate of S. Tax 10.20% 12.24% 12.36% 12.36% 10.30% Amount of S. Tax payable 16,94,94,783 7,37,39,361 8,13,51,059 11,24,72,960 15,61,76,795 59,32,34,959 Total 1,66,53,85.203 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67. 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 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 company is liable to pay service tax on such foreign currency payments made to foreign service providers. In this case as no service is provided by the foreign service providers, no service tax is applicable under Section 66A. Hence the demand made on travelling expenses is unsustainable. As may be noticed, the adjudicating authority'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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 SCN we have paid money to the Indian residents in respect of property taken on rent by us, vehicles taken on rent by us and on cost of expenses paid 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 their submissions interalia submitted in respect of the said service that with regard 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 grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext 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 establishment from which the service is provided or to be provided, or has his permanent address or usual place of residence, in a country other than India, and such service provider does not have any office in India, the person who receives such service and has his place of business, fixed establishment, permanent address or, as the case may be, usual place of residence, in India; 74. This Rule 2(1)(d)(iv) was further amended by the Service Tax (Second Amendment) Rules, 2006, under Notification 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 specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 78. In order to safeguard the revenue I find that Section 72 appears to be invokable. Section 72 of the Act provides the provisions of best judgement, 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 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 or refundable to the assessee on the basis of such assessment. 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 rightly demanded and extended period proviso is invokable for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y treated as income of the company in the previous year whereas this relates to an expense of the company. The same error has been committed by the Department in this year also. 40. In this connection we wish to state that Coca-Cola India Pvt. Ltd. is a manufacturer of concentrates. It sells the concentrates to various bottlers within India. The bottlers purchase the concentrates, which is the essential ingredient for the manufacture of beverages. The bottlers sell their final products beverages in their respective 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 ingredient in the manufacture of beverages, we agreed with the bottlers to share the cost of expenditure of their marketing activities. Hence it is an expense in our hands and not an income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amounts wee paid. 46. The transaction does not fall under the ambit of Business Auxiliary Service as there is no service involved. The bottlers purchase concentrate from Coca-Cola India Pvt. Ltd., and use it in the manufacture of beverages. They do not promote or sell the concentrates which are not marketable to the ultimate consumers. Our relationship with the bottler is that of a seller and purchaser of concentrates and no more. Hence the notice is liable to be dropped only on this ground 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 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CCIPL vide their submissions interalia submitted in respect of the said service that this is in respect of export of services provided by CCIPL to International Auditors Inc., USA (hereinafter referred to as IAI ). IAI is a company incorporated under 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 outside the country and the report is used outside the country, it is an export of service and accordingly no service tax is leviable in respect of the export of services. The appellants submitted that the amount of ₹ 4,74,11,597/- was in respect of services rendered outside India and this amount was received in convertible foreign currency and therefore admittedly that will not be leviable to tax. They also added that for the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagement, procurement and management of information technology or resources or other similar areas of management. And whereas, subsection 65(90)(r) of the Act, as on 01.10.02 reads as under: 'Taxable service means any service provided to a client, by a management consultant in connection with the management of any organization, in any manner:' And whereas, subsection 65(105)(r) of the Act, w.e.f. 16.06.05 as amended reads as under; 'Taxable service mans any service provided to a client, by a management consultant in connection with the management of any organization, in any manner;' It is evident that paras 55 to 57 are 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) STR 817 (Tri. - Del.)], CESTAT held to the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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), which are reproduced below:- 65. M/s. CCIPL vide their submissions interalia submitted in respect of the said service that similarly, again in this case the Department has erred in treating this as an income of the company whereas it is an expense of the company. In Notes to accounts for the year 2009-10 under Para 5(ii) it is stated as follows: The company has taken vehicles 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again reproduced below:- 78. in order to safeguard the revenue I find that Section 72 appears to be invokable. Section 72 of the Act provides the provisions of best judgement, 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 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 or refundable to the assessee on the basis of such assessment. The said para 78 merely quotes Section 72 ibid and the adjudicating authority does not even hint as to how he arrived at the best judgement figures. As is evident from the wordings of Section 72 ibid, the Best Judgement assessment involves a quasi-judicial process expressly requiring that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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