2013 (11) TMI 296 - AT - Service Tax

Business Auxiliary Service u/s 65(19) of the Finance Act, 1994 - Consideration received from US corporate entity Promotion of product by advertisement - Taxable service of promotion/marketing of beverages Waiver of Pre-deposit - Held that - On examination of certain provisions of the bottlers agreement between the assessee and the US entity qua certain clauses - the reasons recorded by the adjudicating authority for concluding that the price adjustment availed by the assessee in respect of amounts payable to CCIP, which is a distinct corporate entity though a subsidiary of the US entity nevertheless constitute payments made by the US corporate entity - reasons recorded for establishing the ownership of the US entity in the essential ingredients of the Beverages manufactured by the assessee, in the context of the concentrate/syrup having been procured by the assessee from CCIP, do not find clear mention in the adjudication order - the petitioner to remit 50% of the assessed service tax liability plus the proportionate interest Partial stay granted.

Summary

Issues:
Service tax demand confirmation, promotion/marketing of beverages, Business Auxiliary Service under Section 65(19) of the Finance Act, 1994, bottlers agreement interpretation, waiver of pre-deposit, ownership of essential ingredients of beverages, balance of convenience.

Service Tax Demand Confirmation:
The petitioner appealed against an adjudication order confirming a service tax demand of Rs.3,74,67,511/-, along with interest and penalty. The proceedings were initiated based on the petitioner receiving consideration from a US corporate entity for promoting its products through advertisements in India. The adjudicating authority concluded that the petitioner provided the taxable service of promotion/marketing of beverages manufactured by the US entity, falling under Business Auxiliary Service.

Interpretation of Bottlers Agreement:
The respondent argued that the bottlers agreement between the petitioner and the US entity established a close nexus, indicating promotion/marketing of products belonging to the US entity through the advertisement campaigns of the petitioner. Specific clauses of the agreement were referenced to support this contention.

Waiver of Pre-deposit:
The petitioner presented interim orders from similar cases where waiver of pre-deposit was granted based on the satisfaction that the assessees were not promoting goods belonging to the US entity. The Tribunal found a prima facie case for the Revenue but noted discrepancies in the adjudication order regarding ownership of essential ingredients and price adjustments.

Ownership of Essential Ingredients:
While a prima facie case for the Revenue was acknowledged, certain provisions of the bottlers agreement and reasons for concluding ownership of the US entity in the essential ingredients of the beverages were found lacking clarity in the adjudication order. The Tribunal considered the balance of convenience and granted waiver of pre-deposit on specific conditions.

Balance of Convenience:
Considering the circumstances, the Tribunal balanced the interests of the petitioner/assessee and the Revenue by granting a waiver of pre-deposit and staying further proceedings from the adjudication order, subject to the petitioner remitting 50% of the assessed service tax liability plus interest within a specified timeline. Failure to comply would result in the dismissal of the appeal. The petitioner's counsel noted the order, indicating understanding of the obligations imposed.