2020 (2) TMI 1255 - AT - Service Tax

Business Auxiliary Services - sale or service - promotion or marketing of goods produced or provided by or belonging to the client - demand of service tax alongwith interest and penalty - HELD THAT - Undisputedly the appellants purchase the concentrate from the Coca Cola India. Learned Authorized Representative after referring to various terms of agreement argues stating that all these conditions reflect that concentrate is only transferred for use and not sold to the bottler. The fallacy in the arguments advanced is self evident if we refer to the definition of sale and purchase as per Section 2(h) of the Central Excise Act, 1944 as it existed then. The said definition has been made applicable to Chapter V of Finance Act, 1994 as per Section 65 (121) ibid - in terms of Section 2(h) of Central Excise act, 1944 the transfer of possession for a consideration in normal course of trade would signify the sale. By stating that the goods namely concentrate was transferred for use by M/s Coca Cola India Pvt Ltd to the Appellant for consideration, a fact not in dispute, the sale of the goods in term of Central Excise Act, 1944 has occurred. The imposition of restrictions or conditions in respect of the usage and consumption of the concentrate, by the seller cannot alter that position. Hence there are no merit in the submission of the Authorized Representative that this transaction was not a truncation of sale but only transfer to use . There are no merits in the impugned order - appeal allowed - decided in favor of appellant. The issue involved in the present appeal is squarely covered by the decisions of the tribunal in case of Superior Drinks Pvt Ltd 2019 (6) TMI 272 - CESTAT MUMBAI . This decision in turn follows the decisions rendered by the Delhi Bench in case of Narmada Drinks (P) Ltd reported at 2017 (3) TMI 1106 - CESTAT NEW DELHI and also in case of Narmada Drinks (P) Ltd reported at 2018 (6) TMI 899 - CESTAT NEW DELHI . Similar view has been expressed by the Allahabad Bench in case of Brindavan Bottlers Ltd 2019 (3) TMI 1428 - CESTAT ALLAHABAD and Mumbai Bench in case of SMV Beverages Pvt Ltd 2017 (3) TMI 942 - CESTAT MUMBAI . It was held in these decisions that

Summary

Issues Involved:
1. Whether the Appellant is liable to pay Service Tax under the category of “Business Auxiliary Services” in respect of the support received from M/s Coca Cola India Pvt Ltd for undertaking Market Promotion of Beverages.

Issue-Wise Detailed Analysis:

1. Liability to Pay Service Tax under “Business Auxiliary Services” (BAS):

Background and Agreements:
The appellants are engaged in the distribution and sale of non-alcoholic beverages under the brand name of The Coca Cola Company (TCCC). They entered into a Bottlers Agreement with TCCC, authorizing them to use trademarks for preparation, packing, distribution, and sale of beverages. The appellants purchase a major portion of the beverages from Amritsar Crown Caps Ltd (ACCPL), a 100% subsidiary of the Appellant, which also has a Bottlers Agreement with TCCC. The appellants are required to advertise, market, and promote the sale of beverages, with financial support from Coca Cola India Pvt Ltd (CCIPL) for marketing and sales promotion.

Show Cause Notices and Commissioner’s Orders:
Show Cause Notices were issued alleging that the appellants, while promoting beverages, were also marketing the concentrate owned by TCCC/CCIPL. It was contended that the appellants were providing BAS of “promotion or marketing of goods produced or provided by or belonging to the client” to CCIPL and had not paid Service Tax on these taxable services. The Commissioner confirmed the demand for service tax, interest, and penalties.

Appellants’ Arguments:
The appellants argued that the issue had been settled in their favor in several decisions, including Superior Drinks Pvt Ltd, Narmada Drinks (P) Ltd, Brindavan Bottlers Ltd, SMV Beverages Pvt Ltd, and others. They contended that the promotion of the brand was not covered under BAS prior to 01.07.2010, and no demand had been made for services provided under the category of “promotion of brand” post 01.07.2010.

Revenue’s Arguments:
The Revenue argued that the conclusions in the Superior Drinks case were incorrect, asserting that Coca Cola USA works as an agent of Coca Cola India, and all terms were set by the Indian company. They argued that the bottlers' sales promotion activities were under the directions of Coca Cola India, and the concentrate was only transferred for use, not sold to the bottler.

Tribunal’s Findings:
The Tribunal found that the issue was squarely covered by the decisions in Superior Drinks Pvt Ltd and other similar cases. The Tribunal rejected the Revenue's arguments, stating that the agreement between Coca Cola USA and Coca Cola India was not part of the relied-upon documents in the Show Cause Notice. It was held that the transfer of concentrate for a consideration constituted a sale under Section 2(h) of the Central Excise Act, 1944, and the imposition of restrictions on its usage did not alter this position.

Conclusion:
The Tribunal concluded that the arguments advanced by the Authorized Representative were without merit. The Tribunal noted that if the arguments were accepted, every manufacturer’s sales promotion activities would be considered as promoting the sale of raw materials, which is not the intention of the taxable category defined as BAS. The decision of the Hon’ble Bombay High Court relied upon by the Commissioner was distinguished, and it was held that the advertisement expenses incurred by Coca Cola India were part of the cost incurred for production of the finished product, thus eligible for CENVAT Credit.

Judgment:
The Tribunal set aside the impugned orders and allowed the appeals, stating that the issue was covered by several decisions in favor of the appellants.

(Operative part of the order pronounced in the court)