2024 (2) TMI 139 - AT - Service Tax

Classification of services - business auxiliary services or not - sale incentive, advertisement and publicity charges received by the appellant - HELD THAT - The issue involved in the present case is no longer res-integra. Reliance is placed in SUPERIOR DRINKS PVT. LTD. VERSUS COMMISSIONER OF C.E., NAGPUR-I 2019 (6) TMI 272 - CESTAT MUMBAI and COMMISSIONER OF CENTRAL EXCISE S.T., LUCKNOW VERSUS M/S BRINDAVAN BOTTLERS LTD. (VICE-VERSA) 2019 (3) TMI 1428 - CESTAT ALLAHABAD where it was held that The activity undertaken were not performed by the appellant for Coca Cola India, but was performed for themselves. Since no activity has been performed by the appellant for Coca Cola India, we are of view that mere receipt of amounts under the head Market Support Received will qualify them as service under Section 65B(44). There are no merits in the impugned order demanding the service tax by classifying the incentive and sale promotion receipts, to be towards the provison of business auxiliary services . As the demand of service tax itself is set aside on merits, the issue not considered on grounds of limitation. Further since the demand of service tax is set aside so is the demand of interest and the penalties imposed. Appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Liability to pay service tax on incentives received.
3. Applicability of extended period of limitation.
4. Imposition of interest and penalties.

Summary:

1. Classification of Services Provided by the Appellant:
The appellant argued that the services provided were not classifiable under "Business Auxiliary Services" (BAS) and hence not liable to service tax. They contended that they were manufacturing and selling goods under an agreement with Pepsi, paying royalty, and not promoting Pepsi's goods exclusively. The Tribunal examined the agreement and found that the activities were for the promotion of their own business, not exclusively for Pepsi. The Tribunal relied on several precedents, including Narmada Drinks (P) Ltd and Brindavan Bottlers Ltd, concluding that the appellant's activities did not fall under BAS.

2. Liability to Pay Service Tax on Incentives Received:
The Commissioner had confirmed a demand of service tax amounting to Rs. 70,18,810/- on incentives received from Pepsi for various marketing schemes. The Tribunal, however, found that the incentives were for the appellant's own business promotion and not for promoting Pepsi's goods, thus not liable to service tax under BAS. The Tribunal cited several cases, including Superior Drinks Pvt Ltd and SMV Beverages Pvt Ltd, to support this conclusion.

3. Applicability of Extended Period of Limitation:
The appellant argued that the demand was time-barred as they were under a bona fide belief that they were not liable to pay service tax. The Tribunal, having set aside the service tax demand on merits, did not consider the issue of limitation.

4. Imposition of Interest and Penalties:
Since the demand for service tax was set aside, the Tribunal also set aside the demand for interest and the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order demanding service tax, interest, and penalties. The decision was pronounced in open court on 30/01/2024.