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2019 (7) TMI 955 - AT - Service TaxClassification of services - Business Auxiliary services or not - manufacture and sale of alcoholic beverages to the customers/indenters of UBL as per the instruction of UBL - demand alongwith interest and penalty - Date of amalgamation/ merger of the Appellant s unit with M/s United Breweries Ltd. - Time Limitation - HELD THAT - After the amendment to the definition of Business Auxiliary Service with effect from 1/9/2009, the activity of manufacture of non-excisable goods, that is alcoholic beverages, would fall within the scope of Business Auxiliary Service - the activity of manufacture of alcoholic beverages, being not an excisable goods, accordingly, does not fall within the exclusion clause of the amended definition of Business Auxiliary Services. The CBEC Circular No. 249/1/2006-CX-4 dt. 27.10.2008 issued clarifying the applicability of un-amended definition of Business Auxiliary Service, hence is not relevant to the facts of the present case. - Decided in favor of revenue. Determination of value - Production or processing of goods for, or on behalf of, the client - Held that - The arrangement/agreement for manufacture and sale of branded alcoholic beverages between the appellant and M/s UBL is a complex one; even though the appellant is authorised to sale the manufactured branded beer in the local market, but the customers/indenters are as per the instruction of M/s UBL; the sale price is fixed by M/s UBL after mutual consultation. Thus it is not a simple provision of service agreement, where under, the service is flown from appellant to M/s UBL and the consideration is received against the service rendered. It is the argument advanced on behalf of the revenue that the service charges are adjusted against the sale price, and the balance amount returned to the service receiver out of the sale proceeds of manufactured branded beer for and on behalf M/s UBL. The value of the services needs to be determined keeping in mind the N/N. 39/2009 ST dt. 23.9.2009 and the principles of valuation prescribed under Section 67 of the Finance Act and the Valuation Rules, 2006. The Adjudicating authority has erred in adopting the sale price of the Appellant. - Decided in favor of assessee. Cessation of service tax liability - Date of amalgamation/ merger between the service provider and principal - Appointed ate is 1.4.2010 - Appellant had not brought to the notice of the Department about the fact of amalgamation scheme presented to BIFR. The Registration Certificate was amended only on 05.12.2012. - HELD THAT - The appointed date i.e. as on 01.4.2010 be taken as the date of amalgamation/merger of the Appellant Unit with M/s UBL as sanctioned by the BIFR. - Decided in favor of assessee. Time Limitation - HELD THAT - The arrangement between the Appellant and M/s UBL for manufacture of branded beer on behalf of M/s UBL has been disclosed and within the knowledge of the Department. In these circumstances, the allegation of suppression cannot be sustained against the Appellant. Therefore, the demand is barred by limitation. Appeal allowed - decided in favor of assessee.
Issues Involved:
1. Classification of the appellant's activity under "Business Auxiliary Service" (BAS). 2. Date of amalgamation/merger for considering service tax liability. 3. Applicability of the extended period of limitation for the demand. Issue-wise Detailed Analysis: 1. Classification of the Appellant's Activity under "Business Auxiliary Service" (BAS): The appellant manufactured and sold beer under the brand name of M/s United Breweries Ltd. (UBL) based on an agreement. The Revenue alleged that this activity fell under the taxable category of "Business Auxiliary Service" (BAS) as amended w.e.f. 01.09.2009, particularly under clause (v) "production or processing of goods for, or on behalf of, the client." The appellant contended that their activity was purely a manufacturing process using their own raw materials and infrastructure, and they paid UBL for using the brand name, which was already taxed under Intellectual Property Right Services. The tribunal noted the changes in the definition of BAS before and after 01.09.2009, which excluded any activity that amounts to "manufacture" of excisable goods. Post-amendment, the exclusion was limited to "manufacture of excisable goods" as defined under the Central Excise Act, 1944. Since alcoholic beverages are non-excisable goods, the tribunal concluded that the appellant's activity fell within the scope of BAS. The tribunal also referred to the Delhi High Court judgment upholding the constitutional validity of service tax on contract manufacturing of alcoholic beverages. 2. Date of Amalgamation/Merger for Considering Service Tax Liability: The scheme of amalgamation approved by BIFR mentioned 01.04.2010 as the appointed date, while the effective date was 16.11.2011, when the order was filed with the Registrar of Companies. The appellant argued that the appointed date should be considered for determining service tax liability, citing the Supreme Court's judgment in Marshall & Sons Co. India Ltd. v. ITO, which held that the appointed date in the scheme should be the date of amalgamation unless the court specifies otherwise. The tribunal agreed with the appellant, stating that the appointed date should be considered as the date of amalgamation. The tribunal referred to various judgments, including Marshall & Sons and ITC Hotels Ltd., which supported the view that the appointed date in the scheme of amalgamation should be the effective date for all purposes, including tax liability. 3. Applicability of the Extended Period of Limitation for the Demand: The appellant argued that the extended period of limitation could not be invoked as there was no willful suppression of facts. The consideration paid to UBL for using the brand name was already taxed under IPR services, and the arrangement was known to the department. The Revenue contended that the appellant did not disclose the manufacturing agreement to the department and thus suppressed material facts. The tribunal found that the arrangement between the appellant and UBL was disclosed, and the consideration for using the brand name was already taxed. Therefore, the allegation of suppression could not be sustained, and the demand was barred by limitation. Conclusion: 1. The appellant's activity of manufacturing beer under the brand name of UBL falls under the amended definition of BAS, and the computation of demand should consider Notification No. 39/2009-ST. 2. The appointed date of 01.04.2010 in the scheme of amalgamation should be considered for determining service tax liability. 3. The demand is barred by limitation due to the absence of willful suppression of facts. The tribunal set aside the impugned order and allowed the appeal.
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