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2019 (7) TMI 956 - AT - Service TaxBusiness Auxiliary Services - business of brewing and bottling of beer at its plant in Aurangabad - non-payment of service tax - 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/transfer of Appellant s brewery unit with M/s Skol Breweries Ltd. In the scheme of arrangement - Time Limitation - HELD THAT - The arrangement/agreement for manufacture and sale of branded alcoholic beverages between the appellant and M/s Skol 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 Skol; the sale price is fixed by M/s Skol after mutual consultation. Thus it is not a simple provision of service agreement, where under, the service is flown from appellant to M/s Skol and the consideration is received against the service rendered. Determination of value - Production or processing of goods for, or on behalf of, the client - Held that - in determining the taxable value, in the present circumstances, Notification 39/2009 dt. 23.9.2009 has been issued, allowing deductions on the value of inputs used in the manufacture/processing of alcoholic beverages, subject to the conditions laid down there under. Cessation of service tax liability - Date of amalgamation/ merger between the service provider and principal - Held that - Date of amalgamation/ transfer of the Appellant s brewery unit with M/s Skol Breweries Ltd. In the scheme of arrangement as per Section 391 to 394 of the Companies Act, 1956 for amalgamation of the Appellant s brewery division with M/s Skol Breweries Ltd. - HELD THAT - The appointed date i.e. as on 31.3.2009 be taken as the date of amalgamation/merger of the Brewery Division with M/s SKOL as sanctioned by the Hon ble Bombay High Court. Time Limitation - HELD THAT - The fact that the Appellant had manufactured beer, affixed the brand name of SKOL and supplied it to them or sold to the customers of M/s SKOL is known to the department. Therefore, there was no suppression of fact, hence, extended period of limitation cannot be invoked - demand is barred by limitation. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the appellants rendered services under the taxable category of "Business Auxiliary Services" (BAS) and whether the computation of the demand is correct. 2. Determination of the effective date of merger/amalgamation of the appellant company with M/s SKOL Breweries Ltd. 3. Whether the demand is barred by limitation. Detailed Analysis: 1. Rendering of Services under "Business Auxiliary Services" (BAS): The appellants were engaged in the business of brewing and bottling beer under a bottling agreement with M/s SKOL Breweries Ltd. The Revenue alleged that the appellants provided services under the category of "Business Auxiliary Services" as defined under section 65(19) read with section 65(105)(zzb) of the Finance Act, 1994, due to an amendment brought by the Finance Act, 2009. The appellants contended that their activities amounted to the manufacture and outright sale of beer to SKOL or buyers nominated by SKOL, and thus should not be considered as services "in relation to production and processing of goods for or on behalf of the client." The Tribunal analyzed the agreement and found that the appellants were required to manufacture beer using their own raw materials, manpower, and infrastructure but under the strict supervision and specifications provided by SKOL. The price of the branded beer was determined by SKOL, and the goods were sold under SKOL's instructions. The Tribunal concluded that the appellants rendered services in the production of goods for or on behalf of SKOL, falling under the amended definition of "Business Auxiliary Services." However, the computation of the demand should consider Notification No. 39/2009-ST dated 23.9.2009, which allows deductions on the value of inputs used in the manufacture/processing of alcoholic beverages. 2. Effective Date of Merger/Amalgamation: The appellants contended that the merger with SKOL should be considered effective from the "appointed date" (31.3.2009) as per the scheme of amalgamation, rather than the "effective date" (21.06.2012) when the certified copy of the order of the High Court was filed with the Registrar of Companies. The Tribunal referred to the judgment of the Hon'ble Supreme Court in Marshall Sons & Co. (India) Ltd. Vs. ITO, which held that the date of amalgamation should be the appointed date specified in the scheme unless the Court specifies otherwise. The Tribunal concluded that the appointed date (31.3.2009) should be considered the date of amalgamation for determining the service tax liability. 3. Demand Barred by Limitation: The appellants argued that the demand was barred by limitation since the details of the manufacturing agreement were already known to the Department, and show cause notices had been issued to SKOL for earlier periods. The Tribunal found substance in this argument, noting that investigations had been initiated against SKOL for the same agreement, and the Department was aware of the facts. Therefore, the demand was barred by limitation. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, concluding that: 1. The appellants rendered services under "Business Auxiliary Services," but the computation of the demand should consider Notification No. 39/2009-ST. 2. The appointed date (31.3.2009) should be considered the date of amalgamation for determining the service tax liability. 3. The demand was barred by limitation.
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