9911796707
TMI Blog2014 (4) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... nd owners but not paying Service Tax, believing it to be taxable under the category of "Intellectual Property Right"under Section 65(65a) of the Finance Act, 1994 and also under the category of Franchise Service which is under Section 65(48) of the Finance Act, 1994. A show-cause notice dated 29.9.2010 was issued as to why Service Tax should not be recovered from the appellant along with interest and also proposing to impose penalties under Sections 76 and 77. 2. The appellant had appeared and contested the show-cause notice but the demands were confirmed with interest and penalties were also imposed under Section 76 @2% per month of outstanding tax or Rs.200/- for every day of default whichever is higher, under Section 77 of the Act Rs.5000/-. Being aggrieved the appellant had filed appeal before the Commissioner (Appeals) on the grounds that - (i) the Revenue had failed to pass speaking order on the jurisdiction issue raised by the appellant in the light of CBE&C instructions F.No. 137/50/2007 dated 16.3.2007. (ii) The payments were actually made by Foster India to SKOL Breweries (Bangalore) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Beer"as goods manufactured under the Trade Marks belonging to Skol (appellant). Clause (2.1) provides that FIPL shall brew and bottled at the Brewery such brands of Skol Beer as specified by Skol from time to time and transport, supply and sell them in accordance with the directions and instructions given by Skol including as regards which states they should be transported, supplied and sold in and the manner and pricing thereof. 5.4 Clause (2.2) provides that the customers to which, and the price at which the Skol Beer manufactured and bottled by FIPL are to be supplied and sold shall be determined at the sole discretion of Skol, and the same shall be final and finding on FIPL. Clause (2.3) provides that FIPL shall not advertise, market or promote Skol Beer. Clause (2.4) provides that FIPL agrees to manufacture the quality of Skol Beer as per the specifications laid down by Skol. Under Clause (2.5) it is provided that FIPL will obtain at its cost all raw materials, packing materials, labels and chemicals and consumables required conforming to specifications, quality and terms as specified in writing by Skol. Clause (2.6) provides that FIPL agrees to manufacture and make available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also provide that the net proceeds shall be exclusive of local excise duty, sales tax, export pass fee, octroi, freight, breakages, transit insurance and any other statutory taxes and levies. FIPL shall be responsible for the remittance of all taxes, duties and any other levies and indemnify Skol against any liabilities arising thereof. FIPL also agrees to pass on the concessions/exemption on taxes or duties and levies to Skol as long as such benefits are made available to them. Clause (3.3) provides that the sale of Skol Beer shall be made according to dispatch instructions issued by Skol or its nominated Indenters. The invoices shall be raised by FIPL at the prices communicated by Skol to them periodically in writing. Notwithstanding anything to the contrary, it is clarified that FIPL shall not be entitled to receive any amounts other than those expressly out herein and any other realizations from sale of Skol Beer shall be remitted to Skol's account. 6. After tasking through the agreements, the appellant argues that FIPL is only a Contract Bottling Unit (CBU), manufacturing and supplying beer as per specifications and formulation including freight and escort to the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i.e. job charges) for undertaking the manufacturing activity on job work basis. There is no doubt that under such an arrangement, CBU is a service provider providing services to BO. A doubt has arisen whether or not the CBU provides a taxable service namely the Business Auxiliary Service (BAS) to BO. This taxable service however, by definition excludes any 'activity that amounts to "manufacture" within the meaning of clause (f) of section 2 of the Central Excise Act, 1944' from its ambit. The issue in dispute is whether such activity would be hit by the exclusion clause mentioned above. 6.3 On examining the scope of manufacture in para 3.3 of the Circular, it is revealed that if the CBU undertakes complete process of manufacture of alcoholic beverage under the 'contract bottling arrangement' as described above the such activity would not fall under the taxable service, namely the BAS. However, in case the activity undertaken by the CBU falls short of the definition of manufacture (such as activity of 'packing' or 'labelling' alone) then such activity would fall within its ambit and would be charged to service tax. 6.4 Further, the appellant drew our attention to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. As such, these levies will not be included for charging service tax. d) Similarly, the surplus/profit earned by the BO being in the nature of business profit (which falls within the purview of direct taxes), will not be chargeable to service tax. 6.6 Thus, the appellant claims that in view of the amendment brought in 2009 w.e.f. 1.9.2009, the bringing into tax net, the activity of job-work provided by the Bottling Unit (service provider) to the service receiver- Brand Owners, there is no exigibility of Service Tax in the appellant's case prior to 1.9.2009. Further, reliance is placed on the ruling of Co-ordinate bench of this Tribunal in the case of Diageo India Pvt. Ltd. vs. Commissioner of Central Excise, Thane-II where in a similar arrangement between the parties, it was held that Brand Owner is not required to pay any Service Tax under the category of Franchise Service taking the notice of clarification vide Board's Circular dated 30.10.2009. 6.7 The appellant also drew our attention to the distinction between the user arrangement, licensed user agreement, registered user agreement and a manufacturing agreement. As per the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Skol beer and packaging as per applicable law. In the event of any claims or complaints being made by any third party in relation to the quality of Skol beer or packaging to Skol beer manufactured and bottled by FIPL. FIPL, at its cost, shall arrange to collect such stocks and drain the same in the presence of Skol representative. In any event, FIPL shall indemnify Skol against all claims, proceedings, losses, damages, charges, expenses etc., if any, which may be made against or suffered by Skol with respect to the Skol Beer manufactured by FIPL. Further, FIPL shall also be liable to bear all costs, claims or losses arising on account of any inordinate delay or loss in production or deterioration in the quality of the Skol beer manufactured by FIPL. Further, the appellant is entitled to collect an amount of Rs. 27/- per case of beer bottle out of the sale proceeds collected by FIPL. Thus, the risk of profit/losses is borne by FIPL. It is not a pure bottling arrangement between parties and thus, Service Tax is attracted as Franchise Service and/or Intellectual Property Right Service. 8. Having considered the rival submissions, we find that as per the agreement between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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