2024 (5) TMI 136 - AT - Service Tax

Levy of service tax - Business Auxiliary Services - incentive received from M/s Pepsi to allegedly promote the sales of goods of Pepsi brand - HELD THAT - The issue in the present appeal is no more res integra and this Bench of the Tribunal vide Final Order No.70040 of 2024 dated 30.01.2024 has allowed the appeal of the Appellant holding that From the activities undertaken by the appellant it is evident that they have not acted towards marketing and promotion or sale of goods produced by their client. At best it can be said that they have participated in promotion of the brand name of Coca Cola Pepsi etc. Such activities cannot be brought under Promotion or Marketing or Sale of Goods Produced or Service Provided by the Client appearing under Business Auxiliary Service . The impugned order is set aside to the extent of confirmation of demand and penalties by the learned Commissioner (Appeals). The appeal filed by the Appellant is allowed.

Summary

Issues involved: Service tax liability on incentive received from brand owner for promoting sales of goods under franchisee agreement.

The Appellant, engaged in manufacturing Bulk Packaged Drinking Water under a franchisee agreement with a brand owner, received incentives to promote sales of goods. The dispute arose regarding the service tax liability on these incentives, categorized as 'Business Auxiliary Services' under Section 65(19) of the Finance Act, 1994. The initial Show Cause Notice (SCN) was adjudicated against the Appellant, leading to an appeal before the Tribunal. The subsequent SCN proposed a demand for service tax and penalties for a specific period, which was confirmed in the Order-In-Original. The First Appellate Authority confirmed the recovery of service tax for a certain period but set aside the demand and penalties for another period, imposing penalties under relevant sections of the Act. The Appellant appealed to the Tribunal challenging the confirmation of demand and penalties.

The issue in the present appeal revolved around whether the incentives received by the Appellant could be subjected to service tax under 'Business Auxiliary Services.' The Tribunal referred to various precedents to analyze similar cases where the promotion of brand names by franchisees was scrutinized. The Tribunal noted that the Appellant's activities did not align with the definition of 'Business Auxiliary Services,' as they were primarily involved in manufacturing and selling goods under the brand name, not marketing or promoting the brand itself. Relying on previous judgments and the Final Order of the Tribunal, the impugned order confirming demand and penalties was set aside, and the appeal of the Appellant was allowed with consequential relief.

In conclusion, the Tribunal found that the Appellant's activities did not fall under the scope of 'Business Auxiliary Services' for service tax liability on incentives received from the brand owner for promoting sales of goods under the franchisee agreement. The Appellant's appeal was allowed based on the analysis of relevant precedents and the lack of alignment with the definition of taxable services under the Act.