2019 (3) TMI 1428 - AT - Service Tax

Levy of service tax - Supply of Tangible Goods Service - venting of refrigerators to their dealers/ distributors - Held that - It is an admitted fact that the appellant-assessee have delivered the refrigerator to the distributor dealer. Such dealer/ distributor is in effective control of the refrigerator post delivery. The appellant only receives an annual rent and on such a rent admittedly appellant have paid VAT/Sales Tax - the appellant is not liable to pay service tax on this activity under the category SOTG. Levy of service tax - reimbursement of advertisement expenses and other sales promotion expenses from their principal Coco-Cola Co. Ltd - Held that - There is no element of receipt of any found toward service. Further, the appellant is not a service provider to Coca-Cola Company Ltd., they are working on principal to principal basis - decision of Tribunal in the case of Narmada Drinks (P) Ltd. Vs Commissioner of Central Excise, Raipur 2017 (3) TMI 1106 - CESTAT NEW DELHI followed - the appellant is not liable to pay service tax on reimbursement of such expenses from Coca-Cola Company Limited. Levy of Service tax - Bundle Holding Charges under the category SOTG - Held that - As it is true that bottles and carets are not capital goods or equipment or appliance, accordingly, no such levy of service tax is possible on the amount of penalty recovered by the appellant-assessee towards over keeping/ or detaining of the bottles and carets by their distributors - Further the receipt under this head is not for providing any service but a levy by way of panel charges on the distributors to encourage them to return the bottles and carets expeditiously back to the appellant for re-use - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the assessee is liable to pay service tax under the category "Supply of Tangible Goods Service" on venting of refrigerators to their dealers/distributors and on reimbursement of advertisement expenses and other sales promotion expenses.
2. Whether the appellant is liable to pay service tax on Bundle Holding Charges under the category SOTG and on Sales Target Incentives received from Coca-Cola Co. Ltd.

Analysis:
1. Issue 1 - Assessee's Appeal:
- The assessee argued against paying service tax under the "Supply of Tangible Goods Service" for venting refrigerators to dealers/distributors and reimbursement of expenses from Coca-Cola Co. Ltd.
- The tribunal examined the definition of taxable service under Section 65(105)(zzzzj) and clarified that supply of tangible goods for use, where possession and control are transferred, is not subject to service tax.
- Since the dealers/distributors had effective control post-delivery of refrigerators and the appellant only received rent subject to VAT/Sales Tax, the tribunal ruled that service tax was not applicable in this scenario.
- Regarding reimbursement of expenses, it was established that the appellant acted as an implementing agency for schemes by Coca-Cola Co. Ltd., and the expenses were reimbursed on actual basis without any service element. Citing a precedent judgment, the tribunal held that no service tax was payable on these reimbursements.

2. Issue 2 - Revenue's Appeal:
- The revenue appealed on the liability of service tax on Bundle Holding Charges and Sales Target Incentives.
- The tribunal noted that bottles and carets did not qualify as machinery, equipment, or appliances under the definition of SOTG, hence not subject to service tax.
- The charges imposed on distributors for holding bottles were not for providing a service but to encourage timely return for re-use. Therefore, the tribunal concluded that no service tax could be levied on these charges.
- Ultimately, the tribunal allowed the appeal filed by the appellant-assessee and dismissed the revenue's appeal, granting consequential benefits as per the law.

This judgment clarifies the non-applicability of service tax on certain transactions involving tangible goods and reimbursements, emphasizing the importance of possession and control in determining tax liability. It also highlights the distinction between charges for encouraging specific actions and charges for actual services rendered, providing a comprehensive analysis of the issues raised by both parties.