2017 (9) TMI 84 - AT - Service Tax

SSI exemption upto 10 lakhs - activity of promoting sale of Koutons brand of readymade garments supplied by M/s. Charley Creations Pvt. Ltd., the owner of said brand - Department entertained a view that the appellants are not eligible for exemption under Notification 6/2005-S.T. as they have been rendering service of business promotion and marketing of branded products - Held that - the services provided under a brand name of other persons are not eligible for the exemption under the aforesaid Notification - The mere fact that a certain brand of goods are being sold through sales outlet of the service providers, would not automatically conclude that the said brand is used for providing business auxiliary services to the client by the service provider. Such a suggestion with reference to many service like cargo handling, C&F, Business Auxiliary, GTA, etc., would make all such service providers out of the purview of Notifn. 6/2005-S.T., as all of them handle goods bearing the brands of other, which certainly is not the intent of the Legislature. In the present case, the Noticee have only handled the goods bearing the brand name of the client in the course of providing the business auxiliary services to the client and except this there has been no other evidence to substantiate the charges of the show cause notice. There is no evidence whatsoever to indicate that the Noticee are providing the business auxiliary service under any brand name owned by other - The contention that when the service recipient is the owner of brand name then how can the Noticee use the same brand name for providing service to the owner of the brand, also deserves acceptance on merits. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appellant's liability to pay service tax for promoting sale of branded products under Notification 6/2005-S.T. exemption.
2. Interpretation of Notification 6/2005-S.T. regarding turnover-based exemption for small scale service providers.
3. Reversal of original authority's decision by Revisional Authority (Commissioner) without detailed reasoning.

Issue 1: Appellant's liability to pay service tax for promoting sale of branded products under Notification 6/2005-S.T. exemption:
The dispute revolved around the appellant's liability to pay service tax for promoting the sale of "Koutons" brand readymade garments supplied by another company. The department contended that the appellant was not eligible for exemption under Notification 6/2005-S.T. as they were engaged in business promotion and marketing of branded products. The Commissioner, in the impugned order, held that the appellant received consideration for promoting, marketing, and selling the branded products, thereby disallowing the exemption. However, the original authority had earlier dropped the demand against the appellant, stating they were entitled to the exemption. The Tribunal found that the impugned order erred in appreciating the scope of the notification and set it aside, allowing the appeal. The Tribunal agreed with the original authority's findings that the appellant did not provide services under the brand name of another person, thus making them eligible for the exemption.

Issue 2: Interpretation of Notification 6/2005-S.T. regarding turnover-based exemption for small scale service providers:
The original authority correctly examined the issue and concluded that services provided under a brand name of other persons were not eligible for the exemption under Notification 6/2005-S.T. The authority noted that merely selling goods bearing a brand name does not mean the service provider is using the brand name for providing services to the client. The Tribunal concurred with this analysis, emphasizing that handling goods with other brands does not automatically disqualify service providers from the notification's purview. The Tribunal highlighted that in the absence of evidence showing the service provider using another's brand name for providing services, the charges against the appellant were unsubstantiated. The Tribunal also referenced a similar case where the exemption was allowed under the notification, further supporting the appellant's position and ultimately setting aside the impugned order.

Issue 3: Reversal of original authority's decision by Revisional Authority without detailed reasoning:
The Revisional Authority, in reversing the original authority's decision, failed to provide detailed reasons for the reversal. The Commissioner simply stated that the appellant received value for promoting, marketing, and selling branded products, acting as a commission agent. However, the Tribunal found this reasoning lacking and highlighted the absence of detailed explanations for overturning the original authority's decision. The Tribunal, after careful review, concluded that the impugned order fell into error in understanding the scope of Notification 6/2005 and set it aside, allowing the appeal due to the lack of substantial evidence supporting the charges against the appellant.

This judgment highlights the importance of correctly interpreting statutory notifications and providing detailed reasoning for decisions, especially when reversing lower authorities' findings. The Tribunal's analysis focused on the specific activities of the appellant in relation to the brand name and the scope of services provided, ultimately leading to the setting aside of the impugned order and allowing the appellant's appeal.