2018 (6) TMI 899 - AT - Service Tax

Business Auxiliary Services - amounts received from M/s Coca Cola Ltd. under the heads Sales Target Incentive - Held 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 - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of Service Tax on amounts received under 'Support Price' and 'Sales Target Incentive' for marketing and promotional activities.

Analysis:
The appeal challenged an Order-in-Original regarding the demand of Service Tax on amounts received by the appellant, a manufacturer of aerated waters, from soft drink brand owners for marketing and promotional services. The Department contended that these amounts fell under 'Business Auxiliary Service' and issued a show cause notice. The lower Authority upheld the demand of Service Tax totaling ?54,84,950 along with interest and penalties under various sections of the Finance Act.

The appellant argued that similar issues had been decided in their favor in previous proceedings before the Tribunal and the Commissioner (Appeals). The appellant's advocate highlighted that the Tribunal had set aside the demand for Service Tax in an earlier order due to the amendment in the definition of 'Business Auxiliary Service' effective from 01/07/2010. However, the Department sought to distinguish the earlier order, emphasizing that the present period fell after the said amendment, justifying the demand.

Upon review, the Tribunal observed that the appellant, as a bottler, received concentrate from brand owners like M/s Coca Cola for manufacturing aerated products under the brand name. The show cause notice alleged that the amounts received were for promoting and marketing the brand name of the owners. The Tribunal noted that the appellant's activities did not involve marketing or selling the concentrate itself but focused on manufacturing and selling aerated water under the brand name. It was clarified that the appellant's participation in promoting brand names like 'Coca Cola' did not fall under 'Promotion or Marketing or Sale of Goods Produced or Service Provided by the Client' as per 'Business Auxiliary Service'.

Consequently, the Tribunal found no justification for the Service Tax demand, ultimately setting it aside and allowing the appeal in favor of the appellant. The Order was pronounced in open Court on 18/06/2018.