Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2019 (6) TMI 272

..... e manufactured by or on behalf of Coca Cola, Coca Cola India (CCI) on behalf of Coca Cola USA reimburses the cost proportionately - demand of interest and penalty - extended period of limitation. HELD THAT:- The clause of the definition which is relevant for such invocation is “i. Promotion or marketing or sale of goods produced or provided by or belonging to the client;”. A plain reading of the said clause will make it evident that the activities undertaken by the service provider should be towards promotion or marketing or sale of goods produced or provided by the service recipient. In the present case how the Bottler Agreement or the clause 5 of the Business Protocol 2012, support such an conclusion is beyond comprehension of a rational mind. The clause 5 of Business Protocol clearly is not establishing the relationship of service provider and service recipient between the appellants and Coca Cola India - Appellants use the concentrate supplied/ procured from Coca Cola India, for the production/ manufacture of finished products. They sell their finished products in the market as pr the plan and marketing strategy finalized by them in association with the brand owners .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... vastava, Member (Technical) And Dr. Suvendu Kumar Pati, Member (Judicial) Shri J.K. Mittal, Advocate for the Appellant Shri Bidhan Chandra, Authorised Representative for the Respondent ORDER PER: SANJIV SRIVASTAVA This appeal is directed against order in original No 03/ST/2015/C/NGP-I dated 30.06.2015/ 22.07.2015 of the Commissioner Central Excise Nagpur-I. By the said order Commissioner held as follows: 1. I confirm the demand of Service Tax of ₹ 90,71,731/- (ST ₹ 88,07,506/- + Ed Cess ₹ 1,76,150/- + SH Ed Cess ₹ 88,075/-) (Rupees Ninety Lakhs Seventy One Thousand Seven Hundred and Thirty One Only) under proviso to Section 73(1) of Finance act, 1994. 2. I order to recover interest under Section 75 of the Finance Act, 1994 at appropriate rate on the aforesaid amount of Service Tax recoverable from the Noticee. 3. Under Section 76 of the Finance Act, 1994, I impose a penalty on the Noticee of ₹ 200/- per day during which failure continues OR at the rate of two percent of such tax per month, whichever is higher. This penalty is applicable in respect of non-payment of service tax for the period upto 10/05/2008 starting from the first day of the due date t .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... with commitment of both sides including marketing investment. Share of marketing spends between Coca Cola India and Appellants. Coca Cola is compensating appellant for marketing & promotional activities expenditure inform of reimbursements. 2.4 Since the sale, promotion & the marketing activities for beverages undertaken by the appellants directly promotes the sale of concentrate manufactured by or on behalf of Coca Cola, Coca Cola India (CCI) on behalf of Coca Cola USA reimburses the cost proportionately. Thus the appellants are liable to pay service tax under the category of Business Auxiliary Services in respect of such reimbursement/ compensation received from Coca Cola. 2.5 A show Cause Notice dated 20.02.2014 has been issued to the Appellant asking them to show cause as to why service tax short paid/ not paid amounting to ₹ 90,70,731/- be not demanded and recovered from them under the proviso to section 73(1) of Finance Act, 1994. Also why interest at appropriate rate on the amount determined as short/ not paid be demanded under Section 75 and penalties under Section 76, 77 & 78 be not imposed on them. Penal amount should not be recovered under Rule 7C of th .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... esentative for the revenue. 4.2 Arguing for the Appellants leaned Counsel submitted: i. Revenue officers had been conducting regular audit and verification of the records of the appellant during the period for which dispute has been unearthed. Thought there records were regularly audited verified no such dispute was ever raised. The details of audit conducted are as follows: S No Period of Audit Month of Audit a April 2006 to June 2010 September 2010 b July 2010 to September 2012 November 2012 c October 2012 to November 2013 January 2014 ii. Though the unit was being regularly audited no such dispute a raised in Show Cause Notice dated 20.02.2014 for the period October 2008 to March 2013 was ever pointed out. iii. Wrong and contrary facts have been recorded in impugned order: a. Though they were filing the returns it has been recorded that they were not filing the returns. The order at some place records the fact of filing the return and at other place records that returns were not being filed, Inherent contradictions in the order. b. Records were admittedly provided by them but order states that they were recovered under the Panchnama proceedings. c. Tribunal Larger Bench decision .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ry Service in form of promotion or marketing or sale of goods produce or provided by or belonging to client ii. In case of Coca Cola India Pvt Ltd [2009 (15) STR 657 (Bom)] Bombay High Court has allowed the CENVAT Credit to concentrate manufacture on advertising service used for marketing of soft drinks manufactured by bottlers. The advertisement of aerated water is integrally connected with manufacture and sale of concentrate. Beverages are made by diluting concentrate with water and addition of sugar and carbon dioxide. iii. The advertisement of soft drink enhances the marketability of concentrate has already been settled in case of Pepsi Food Ltd [1996 (82) ELT 33 (T)], [1997 (1) ELT 544 (SC)] and [2003 (158) ELT 552 (SC)]. iv. Once it is established that advertisement of aerated water promoted marketability of concentrate the natural corollary that follows is that such activities are rightly covered in the section 65 (19)(i) prior to 01.07.2012, and post 01.07.2012 they do not fall under the negative list and hence taxable. v. Neither show cause notice nor adjudicating authority holds that the demand is made under the category of brand promotion. vi. Even if it is assumed witho .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... r marketing or sale of goods produced or provided by or belonging to the client; or (ii) Promotion or marketing of service provided by the client; or (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services which are inputs for the client; or Explanation: For the removal of doubts, it is hereby declared that for the purposes of this sub clause, inputs means all goods or services intended for use by the client. (v) Production or processing of good for, or on behalf of client; or (vi) Provision of services on behalf of the client; (vii) A service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi) such as billing, collection or recovery of cheques, accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision. and includes services as a commission agent, but does not include any information technology service. 5.3 The demand has been made treating that this amount has been received by the appellant for undertaking marketing promotion of the goods belonging to the client i.e. concentrate supplied by Coca Cola India .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ng investments which indicate the total budget for marketing spend and how much marketing spend will be shared between CCI and Noticee (i.e. sharing ratio). The said clause 5 is reproduced below: 5. Marketing Investments Value in Rs DME BUDGET 2012 ACTIVITY TOTAL BUDGETED SHARING RATIO COKE SHARING BOTTLER SHARING Signage 1200000 1:03 300000 900000 Key Accounts Tie Ups 2000000 1:03 500000 1500000 Gift Packs 1350000 1:1 675000 675000 National UTC 7750000 1:03 1937500 5812500 Maaza Swarna Utsava QPDS 2000000 1:03 500000 1500000 Maaza Price Off Promotion 3024000 1:03 756000 2268000 Coke IMC 1000000 1:03 250000 750000 Rural Activation 1000000 1:03 250000 750000 Maaza Tetra Qpds 4000000 1:00 4000000 0 E & D Bar Activation 1000000 1:02 333333 666667 2LIT PROMO (On-Label/ Sticker) 4000000 1:03 1000000 3000000 600 MI Search Card Promo 3000000 1:03 750000 2250000 Fridge Pack Promo 1000000 1:02 333333 666667 Coke Activation in Trade 1000000 1:03 250000 750000 OYA 13860000 6006000 7854000 Modern Trade Promotions 1000000 1:01 500000 500000 Local Festive Activation 1400000 1:03 350000 1050000 IMC s Sprite & Limca 1000000 1:02 333334 666666 Red Elements 3150000 1:02 1050000 2100000 TOTAL .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... t do not flow from these and is a conclusion drawn to establish service provider and service recipient relationship. The conclusion drawn that these promote the sale of concentrate is also without any legal basis. Appellants use the concentrate supplied/ procured from Coca Cola India, for the production/ manufacture of finished products. They sell their finished products in the market as pr the plan and marketing strategy finalized by them in association with the brand owners. The objective of the sale promotion activities undertaken by them is to promote the sale of Beverages of various brands owned by Coca Cola USA and bottled by them. Any further extrapolation made by revenue for drawing the conclusion is beyond the express intent of the Bottler Agreement. 5.8 Commissioner has in para 23.2 & 23.3 of his order quoted heavily from the order of Bombay High Court in case of Coca Cola India [2009-TIOL-449-HC-MUM-ST] and concluded that Appellants were in fact providing the services to the Coca Cola India. The said para of order of Commissioner are reproduced below: 23.2 It was further observed that the major ingredient of these beverages is concentrate which is exclusively supplie .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... e of various non-alcoholic or alcoholic beverages. These preparations can be obtained by compounding vegetable extracts of heading 13.02 with lactic acid, tartaric acid, citric acid, phosphoric acid, preserving agents, foaming agents, fruit juices, etc. The preparations contain (in whole or in part) the flavouring ingredients which characterize a particular beverage. As a result, the beverage in question can usually be obtained simply by diluting the preparation with water, wine or alcohol, with or without the addition, for example, of sugar or carbon dioxide gas. Some of these products are specially prepared for domestic use; they are also widely used in industry in. order to avoid the unnecessary transport of large quantities of water, alcohol, etc. As presented, these preparations are not intended for consumption as beverages and thus can be distinguished from the beverages of Chapter 22. The heading excludes preparations of a kind used for the manufacture of beverages, based on one or more odoriferous substances (heading 33.02) The above extract demonstrates that the concentrates contain the flavouring ingredient are characteristics of a particular beverage. The beverage in que .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ink forms part of the cost of manufacture of Concentrate ; (v) The advertisement of soft drink enhances the marketability of Concentrate. (vi) The concentrate is manufactured by the Appellants for sale exclusively to the bottling companies who, in turn manufacture the soft drinks. The bottling companies, in their turn, buy the concentrate exclusively from the Appellants. The consumption of concentrate vis-a-vis the soft drinks is in a theoretically defined proportion. As there is no sale of the concentrate by the Appellants to any consumer other than the bottling companies, the singular manner of enhancing the marketability and demand for the Appellants products, therefore, is by enhancing the market for the soft drinks, for which purpose alone, the Appellant undertakes the activities such as market research and advertising. 16. According to the Applicant, advertisement of aerated water is integrally connected with manufacture and sale of concentrate. The concentrate/base is an essential intermediate product for the manufacture of relevant aerated water. The final product aerated water is simply obtained by diluting the concentrate with water, sugar and carbon dioxide. Essentially .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... eiver is well established and there is an explicit element of service in the instant case viz the Noticee had undertaken the sales promotion activities of concentrates of CCI for which CCI were compensating the noticee in the form of Market Support Received as consideration. Therefore, I find that the above sales promotion activities undertaken by the Noticee fall under category of Business Auxiliary Service as defined under Section 65(19)(i) of the Finance Act, 1994 and are chargeable to Service Tax under Section 66 of Finance Act, 1994 for the period prior to 01.07.2012. 5.9 There cannot be more convoluted application of the decision of the High Court and stretching the provisions in an agreement for purpose of levy of tax. If the arguments of the Commissioner were to be accepted then in that case every manufacturer/ producer/ supplier of the goods who purchases and material/ inputs is promoting the sale of his input supplier. Since as the sale of his finished goods goes up automatically consumption of inputs will go up and accordingly he promotes the sale of input manufacturer/ supplier. In our view such an interpretation is neither logical or rational. Both input suppliers and .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... ce or Order-in-Original under which sub-clause the appellant's service is being charged to service tax. By process of elimination, we conclude that it is likely to be under Promotion or marketing or sale of goods produced or service provided by the client ; we note that no investigation has been undertaken by Revenue into the reasons for which appellants have received the payments. Hence, it is not very clear why the appellant has received the said amounts from M/s. Coca Cola. However, the Show Cause Notice, in Para 6.2, has stated that the amounts have been received from the brand owners to promote and market the brands of the brand owners. 10.When we look at the clause (i) the definition of the BAS, which covers promotion or marketing or sale of goods produced or service provided, we fail to see how the promotion of the brand name can be brought under the above clause. The appellant has received concentrate from M/s. Coca Cola. Obviously, the appellant is not marketing or selling the concentrate as a brand name. The appellant's contention is that they are manufacturing the goods bearing the brand name and not the brand owners and therefore they cannot be charged service t .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... CESTAT, Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi v. Shriya Saran (supra), and the decision of the Division Bench of the Bombay High Court in the case of Indian National Shipowners' Association v. UOI (supra). Business auxiliary service and brand promotion are distinct service heads as admitted in the order of the Respondent No. 3 that the amount of ₹ 2,62,61,782/- was received by the petitioner on account of brand endorsement. Since brand endorsement was not a taxable service during the period of time for which the tax demand has been raised, such demand cannot be sustained. Such service rendered by the petitioner could not taxed under the head of Business Auxiliary Service as has been sought to be done. We find that the above decision of the High Court settles the present issue in favour of the appellant. 14.In view of the above discussions, we find no justification for the demand of service tax raised under BAS for the period 2006-07 to 2009-2010. Consequently, the impugned order is set aside and the appeal allowed. Narmada Drinks Pvt Ltd [Final Order No ST/A/52245/2010-CU(DB) dated 18.06.2018] 5. After hearing both sides and perusal .....

X X X X X X X

Full Text of the Document

X X X X X X X

..... wn 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. The simplest exposition which comes to my mind for explaining the above is as follows: A person goes for a haircut and the charges for the haircut are paid by his wife, then whether the act of payment made by wife implies that husband has rendered certain services to wife, in terms of definition of service under section 65B(44) of the Finance Act,1994? . If the answer to this question is yes that act of making the payment was to determine, whether the husband has carried out an activity for his wife, then Commissioner would be right in his approach. In our view the consideration cannot be determinant of performance of an activity by one person for another. The service provider and service receiver relationship gets established only on identification of the activity that one person performs for the another. 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||