2013 (8) TMI 118 - AT - Service Tax

Sale of liquors - Business Auxiliary services Marketing service in relation to sale of goods (IMFL , Beer etc.) produced / belonging to the distilleries - Appellant a Government of Rajasthan Undertaking, registered under the Companies Act, 1956 is entrusted by the State Government with the business of purchase of IMFL and Beer (liquor) from manufacturers, transport of liquor to various depots of the appellant and for further sale thereon to various licensees (i.e. with the wholesale trade in liquor), with a view to regulate supply of liquor through conferring the exclusive privilege of purchase and sale in the wholesale thereof upon the appellant. As a consequence of the monopoly assumed by the State Government in this area and confirment of the privilege on the appellant, it is mandatory for all manufacturers/distilleries/suppliers to sell liquor in the State only through the canalising agency, namely the appellant Held that - Relying upon the Tribunal judgment dated 21.12.2010 in the case of Kerala State Beverages (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. Extended period of Limitation - Held that - The statement of the General Manager of the appellant was recorded in April 2008 under Section 14 of the Central Excise Act, 1944 disclosed sufficient particulars of the activities of the appellant. The requisite information was provided by the appellant to Revenue only in bits and pieces. Eventually a show cause notice was issued on 11.07.2008, within three months of recording of the statement of the appellant s representative, under Section 14 - There was wilful suppression of relevant material with a view to evade liability to tax, cannot be faulted nor considered inconsistent with the statutory prescriptions that justify invocation of the extended period of limitation Decided against the Assessee.

Summary

Issues Involved:
1. Liability of the appellant to service tax under Business Auxiliary Service (BAS).
2. Ownership and title of liquor during transactions between the appellant and manufacturers/distilleries.
3. Applicability of the extended period of limitation for service tax demand.

Issue-wise Detailed Analysis:

1. Liability of the Appellant to Service Tax under BAS:
The appellant, a Government of Rajasthan Undertaking, was engaged in the purchase and sale of liquor within the state. The Revenue assumed that the appellant provided taxable Business Auxiliary Service (BAS) to liquor manufacturers/distilleries and issued a show-cause notice for the non-remittance of service tax. The adjudication order confirmed the service tax demand, interest, and penalties.

The appellant contended that it did not provide any service to other entities since it purchased liquor from manufacturers and sold it within the state. It relied on previous Tribunal judgments (Chattisgarh State Beverages Corp., Karnataka State Beverages Corp., and Kerala State Beverages Corp.) to argue that no taxable service was provided. However, the Tribunal analyzed the terms of the agreement between the appellant and the manufacturers and concluded that the appellant was rendering BAS by marketing and providing services related to the sale of goods produced by the distilleries.

2. Ownership and Title of Liquor During Transactions:
The Tribunal examined the agreement dated 31.03.2005 between the appellant and a distillery, which revealed that the ownership of the liquor remained with the manufacturers/distilleries until sold to retail licensees. Key clauses indicated that the appellant acted as a consignee and not the owner of the liquor. For instance, payment to the manufacturer was made only after the sale of liquor, and demurrage charges were borne by the manufacturer for unsold stock.

The Tribunal concluded that the property in the liquor did not pass to the appellant, and the appellant was merely providing services related to the sale of liquor, thus falling under the definition of BAS as per Sections 65(19) and 65(105)(zzb) of the Finance Act, 1994.

3. Applicability of the Extended Period of Limitation:
The appellant argued that the proceedings were barred by limitation and that the extended period of limitation under Section 73(1) of the Act was not applicable. However, the Tribunal found that the appellant had not registered as a service provider, filed returns, or remitted service tax, despite clear obligations under the Act. The evasion was discovered by Revenue through intelligence operations and subsequent inquiries.

The Tribunal held that the appellant's actions amounted to willful suppression of material facts to evade tax, justifying the invocation of the extended period of limitation. The show-cause notice was issued within three months of obtaining detailed information from the appellant, supporting the Revenue's stance.

Conclusion:
The Tribunal upheld the adjudication order, confirming the service tax demand, interest, and penalties. It dismissed the appeal, concluding that the appellant was liable for service tax under BAS, the ownership of liquor remained with the manufacturers, and the extended period of limitation was rightly invoked due to willful suppression of facts by the appellant.