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TMI Blog2011 (5) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of recovery of the following dues adjudged against them vide Order-in-Original No. 49-51/2009 ST, dated 27-11-2009:- (a) Service tax of Rs. 13,15,91,471 under section 73(2) of the Finance Act, 1994 (the Act). (b) Applicable interest on the above amount. (c) Penalty of Rs. 13,15,91,471 imposed under section 78 of the Act. (d) Penalty of Rs. 10,17,92,834 imposed under rule 15 of Cenvat Credit Rules, 2004 (CCR) read with section 78 of the Act. (e) Penalty of Rs. 100 per day up to 17-5-2006 and Rs. 200 per day from 18-5-2006 onwards for the period when the demand of service tax remains unpaid, under section 76 of the Act. (f) Penalty of Rs. 8,000 under section 77 of the Act. The order also disallowed Cenvat credit of Rs. 10,17,92,834 under rule 14 of CCR read with section 73(2) of the Act found to be irregularly availed by the assessee on inputs and input services. The period of dispute is from 10-9-2004 to 30-9-2007. 2. The facts of the case are that M/s. Herbertsons Ltd., Mumbai were engaged in the manufacture of Indian Made Foreign Liquor (IMFL for short) and packaged drinking water bearing various brand names/trade marks owned by them. It transpired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Licencing Agreement and Usership Agreement respectively. 2 per cent of the net sales realization of IMFL was mutually agreed to be the consideration towards intellectual property service rendered by the assessee in terms of the above clauses of the agreements. This position was communicated to the DGCEI vide letter dated 17-2-2006 of the assessee. The assessee also discharged its liability under the IPS in respect of the packaged drinking water manufactured on its behalf. 3.1 The assessee discharged its tax liability to the tune of Rs. 10,17,92,834 utilizing Cenvat credit availed by it on inputs and input services. Vide the impugned order, the Commissioner found that except for advertisement and sales promotion relating to the brand names of the assessee, credit taken on inputs used in the manufacture of IMFL by the assessee and input services received such as security service, audit and manpower recruitment was not admissible. These inputs and input services had no nexus with the output services of the assessee viz., intellectual property service. Moreover in terms of rule 6(3)(c) of CCR, the assessee could not have utilized Cenvat credit to discharge the service tax liability i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When IPS is rendered such control is not exercised over the transferee of IPR. (a) The appellant would have the right of quality control, inspection, sampling. The appellant have absolute discretion to reject any batch of production for quality reasons and the cost of such rejection shall be borne by the CBUs. (b) Various raw materials required for the manufacture of IMFL would be purchased by the CBUs, in accordance with the standards and specifications and at the price set by the appellant. The blending and bottling should also be as per the specifications provided by the appellant. (c) The sale proceeds will be deposited in an account to be operated by the appellant's personnel and the CBUs are entitled to retain only the retention money, which comprises of the cost of production and the labour charges payable to them. (d) The trade marks are the appellant's property and the CBUs cannot claim any right, title or interest therein. Except for the sale of IMFL to the appellant and as directed by the appellant, the trade marks cannot be used by the CBUs for any other purpose, in any corporate title or trading name. The appellant have the absolute right to use our br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Government to manufacture such alcoholic beverages) manufactures alcoholic beverages under authority to use such brand name granted by the BO. The BO may also provide technical staff/assistance to maintain required quality. The alcoholic beverages, so manufactured are directly sold (after paying State excise duty) by licencee/manufacturer. Property, risk and reward of the products so manufactured rest with the licencee/manufacturer and not with the BO, who is paid an agreed sum for grant of permission to use such brand name and the technical know-how. In such cases the BO provides taxable service, namely 'Intellectual Property Service' to the licencee/manufacturer. The tax is chargeable on the gross amount charged by the BO from the licencee/manufacturer." 7. We have carefully considered the records of the case and rival submissions. In the instant case, the assessee provided technical know-how and got IMFL/packaged drinking water manufactured by CBUs/tie up manufacturers. Assessee charged consideration for allowing the CBUs/tie up manufacturers using its brand name on the IMFL/packaged drinking water at the rate of 2 per cent of the net sales realization and paid service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay an amount equal to ten per cent of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory. Rule 6(3)(c) .. the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output service. Explanation I - The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the Cenvat credit or otherwise. Explanation II - If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of Cenvat credit wrongly taken." Exempted goods is defined in rule 2(d) of CCR as follows:- "Exempted goods" means excisable goods which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act. 9. We find that alcoholic beverages not being excisable goods do not fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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