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M/s. Carlsberg India Pvt. Ltd. Versus C.S.T., Delhi

2015 (12) TMI 1403 - CESTAT NEW DELHI

Demand of service tax - franchise service - presumption and arbitrary quantum while doing best judgement assessment - Suppression of facts - invocation extended period of limitation - Held that:- Adjudicating authority has observed that the appellant “deliberately tried to suppress the facts from the Department” and then adds that “M/s. Carlsberg India Pvt. Ltd. wilfully suppressed all the material facts regarding nature of service provided by them in respect of “Intellectual Property Services o .....

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ent of the alleged services.

In the Show Cause Notice dated 18.10.2012, the figures for 2011-12 have been taken to be 10 times those for 2010-11 under the “best judgment assessment” without any basis / reason which almost smacks of outright mala fide and the adjudicating authority blindly adopted those figures under “best judgment assessment” without even a whisper as to how such a quantum jump (tenfold) in the assessable value was justifiable as 'best judgement assessment' under Sect .....

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ssion regarding the contentions and arguments of the appellant and makes a mockery of the quasi-judicial process in-as-much-as it is not merely non-speaking, but also absurd in parts.

In the absence of analysis/reasoning with reference to the contentions of the appellant, the conclusions drawn in the impugned order are rendered lifeless - we set aside the impugned order and remand the case to the adjudicating authority for de novo adjudication after giving the appellant an opportunit .....

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which following service tax demands along with interest and penalties were confirmed. The demand was confirmed in respect of six Show Cause Notices summarised as under:- Sl. No. Show Cause Notice No. & Date Period covered in SCN Impugned demand of Service Tax (Rs.) 1. C. No.D-III/ST/R-II/SCN/ Carlsberg/187/2010/2290 dated 30.05.20111 2007 - 08 to 2009 - 10 67,74,997.00 2. C. No.D-III/ST/R-II/SCN/ Carlsberg/187/2010/5924 dated 18.10.2011 2010 - 11 45,16,665.00 3. C. No.D-III/ST/R-II/SCN/ Carl .....

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by Road Service , Intellectual Property Service other than Copyright , Management Consultants Service , Test, Inspection, Certification Service , Market Research Agency Service and Scientific and Technical Consultancy Service . The appellant was manufacturing beer under the Trademarks owned by M/s. Carlsberg Breweries A/S, Denmark. The appellant entered into the India Licence Agreement (ILA) dated 07.12.2006 with Carlsberg Denmark and has been manufacturing beer under trademarks Carlsberg , Tub .....

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did not discharge service tax liability. When the case was taken up for stay application during the hearing, both sides agreed that the appeal itself could be disposed of. Accordingly, we waive the requirement of pre-deposit and proceed to dispose of the appeal. 3. Ld. advocate for the appellant essentially contended that (i) The appellant had made the following statements before the adjudicating authority:- (a) Carlsberg Denmark was not providing franchise service to the appellant under the ILA .....

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o use the trademarks under the ILA were issued during the same relevant period and that too demanding service tax under two different taxable services, namely Franchise Service and IPR Service. (e) No consideration has been paid by the appellant to Carlsberg, Denmark. Hence, no service tax is payable on the alleged service. (f) Even assuming without accepting that there was a consideration for the grant of the right to use the unregistered trademark Palone , since the transaction involves no tax .....

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f money. (i) The arrangement between the appellant and Carlsberg Denmark did not satisfy the ingredients of a franchise agreement. (j) Even if it is assumed without accepting that non-monetary consideration is involved in the impugned transaction, the value of similar services by Carlsberg, Denmark to any other person is the taxable value to be adopted. (k) Without prejudice to the other submissions, it was submitted that the amount alleged to have been paid by the appellant must be treated as c .....

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actual figures to the Commissioner but the Commissioner resorted to best judgement assessment in respect of demand confirmed under franchise service for the periods 2010-11 and 2011-12. Under the best judgement assessment, the figure for 2010-11 was taken to be double of the preceding year and the figures for 2011-12 was taken as 10 times that for 2010-11 without giving any basis. (iii) The adjudicating authority did not give any finding in respect of any of the submissions made by the appellant .....

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we deem it proper to quote paras 36 to 41 of the impugned order, which contain the entire analysis in the impugned order and are reproduced below:- 36. In view of the above mentioned submissions I am of the view that: The Indian subsidiary and the foreign principal entered into an agreement dated December, 2006, whereunder the Indian subsidiary was required to pay royalty to the foreign principal and the foreign principal was reimbursing the same amount as marketing support. There was neither bo .....

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ice non-monetary consideration = Royalty (tax was charged on IPR & Franchisee Service). The last two SCNs are based on Best Judgement. Further the benefit of Notification No.17/2004-ST towards R&B cess was not given. Further SCNs are based on details submitted during investigation and there is quantification error by the tax payer after submitting the reply in March 2012. Further, issues are made clear in the following paragraph. M/s. Carlsberg India Pvt. Ltd. (Indian subsidiary) entered .....

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he nature of temporary transfer of the use of Trademark, which is owned by M/s. Carlsberg Breweries A/s, Denmark. Therefore it is clear that the Ms. Carlsberg Breweries A/S, Denmark has provided the service to M/s. CIPL, which falls under the category of Franchisee Service , defined under Section 65 (105) (zze) ibid, effective from 01.07.2003 as amended and the contentions of the noticee that M/s. Carlsberg Denmark was not providing Franchisee service to the Noticee under ILA hence demand is not .....

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is clear, that M/s. CIPL is liable for payment of Service Tax under Section 67(ii) of Finance Act, 1994 on the amount of Royalty paid in the form of consideration. 37. I therefore hold that M/s. CIPL is liable to pay service tax on amount of royalty paid to M/s. Carlsberg breweries A/s, Denmark in terms of notification no.11/2006-ST dt.19.04.2006, and it is also observed that M/s. CIPL failed to determine the gross value of service tax in respect of Franchise services as shown in reply to SCN. 3 .....

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Intellectual Property Service Other than Copyright and the gross amount received by them during the aforesaid period as Royalty/franchisee services and at no stage did they enquire about taxability of their services. It is due to the investigation by the department, that the said facts of providing the services & non-payment of service tax by them came to notice. I find that the extended period of five years under proviso to section 73(1) of the Finance Act 1994 has been correctly invoked .....

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nt to evade payment of Service Tax and/or by suppressing the facts & value of taxable service from the Service Tax Department. (iii) Penalty needs to be imposed upon them under Section 76 of Chapter V of the Finance Act, 1994 for not paying the appropriate Service Tax by the prescribed due dates; (iv) Interest on the amount determined to be payable by the said noticee should be charged from them under Section 75 of Chapter V of the Finance Act, 1994. 41. Further the Demand raised in the five .....

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On similar issue is being confirmed on same lines as per CBEC Circular No.752/68/2003-CX dated 1.10.2003, and M/s. CIPL is liable to pay interest and penalty in the similar ratio as per order in the instant case, along with service tax demanded respectively in each case. From the perusal of the aforesaid paragraphs, it becomes loud and clear that none of the contentions of the appellant have been analysed in the impugned order. Even the contentions regarding non-invocability of the extended peri .....

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riod as royalty / franchisee service and at no stage did they enquire about taxability of their services . It is obvious that the paragraph has been written without application of mind because in the present case no amount was received by the appellant as royalty/franchise service ; indeed the appellant paid the amount to foreign based company. The appellant did not provide the alleged services, but was the recipient of the alleged services. Similarly, we find that the appellant had contended th .....

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