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TMI Blog2015 (2) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... en or assured by the agent to the respondent have been misunderstood as 'Royalty' which is not the fact. The ground of limitation is also upheld in favour of the respondent. - Decided against Revenue. - Appeal No. ST/377 & 609/2010-MUM - - - Dated:- 27-11-2014 - Anil Choudhary And P S Pruthi,JJ. For the Appellant : Shri N N Prabhudesai, Superintendent, AR For the Respondent : Shri V B Gaikwad, Adv ORDER Per: Anil Choudhary: M/s Y. M. Krishna Sahakari Sakhar Karkhana Ltd. (hereinafter referred to as Appellants), Rethanre Bk., Post-Shivnagar, Tal-Karad, Dist. - Satara having Central Excise Registration No. AAAAKO946L XM-001 are engaged in the manufacture of sugar and molasses, and also having their Distillery Division operational since 1976. 2. The brief facts are that in the distillery, among other products like foreign liquor, etc., the Appellants are also manufacturing 'country liquor' under their own brand name Pahil Dhar which is approved by the State Excise Authority. The appellant had entered into 'selling agency agreement' dated 10.04.2002 with M/s Talreja Trade (HUF), Karad for a period of five years up to 31.03.2007 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the sales tax returns (along with challans), which are assessed by the Sales Tax department for Financial Year 2007-08 to 2008 -09, are filed in paper book. 4. That Revenue issued show-cause notices dated 23.10.2008 and dt. 31.8.2009 for the period 2007-08 and 2008-09 asking to show cause as to why a total Service Tax amounting to ₹ 13,80,627/- towards 'Business Auxiliary Services' and ₹ 40,88,516/- towards 'Intellectual property service' should not be demanded recovered from it, in terms of the agreement stated above between the appellant and M/s Talreja Trade (HUF) along with interest and penalty. The show-cause notice alleges that the appellant have undertaken manufacture of 'country liquor; from spirit on job work basis for M/s Talreja Trade. This activity falls under the category 'Business Auxiliary Services'. Further, the appellant have allowed M/s Talreja Trade to use its brand name Pahili Dhar for marketing 'country liquor' and this activity falls under the category intellectual property services. 5. The respondent-assessee filed reply to the show-cause notices contesting the proposed demands mainly on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. Talreja (proprietor of M/s Talreja Trade (HUF), has admitted that the minimum guaranteed margin (i.e. ₹ 18 per case) is nothing but royalty to be paid to the Respondents for using the brand name owned by the respondents for selling country liquor in the market. 6.3 Further, nowhere in the agreements dated 10.04.2002/01.01.2006 there is any mention of the word royalty . Plain reading of the said agreements will reveal that the said agreements are to appoint M/s Talreja Trade (HUF) as the 'sole selling agent' of the respondents for 'country liquor' and are not the agreements for allowing M/s Talreja Trade (HUF) to use the appellants brand name. Most importantly, in the said agreements, it is specifically provided that the 'brand names' will be the exclusive property of the respondents and M/s Talreja Trade (HUF) will have no claim, right, title, or interest in the said brand names. Thus, it is clear that the learned Commissioner of Central Excise, Pune-II had arrived at the above said conclusion merely because the Chief Accountant of the respondent has stated that the amount of ₹ 18 per case is royalty to be received from M/s Talreja Trade ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by the statement of the proprietor of M/s Talreja Trade (HUF) which is totally ignored by the learned Commissioner while passing the impugned order, rendering the findings perverse. 6.8 That any person who wants to manufacture and sell country liquor under a particular brand name, has to get the CL-1 licence from the State Excise authority. The person is bound to get the brand name (under which he wants to sale the country liquor to be manufactured by him) approved from the State Excise authority and without such permission of the State Excise authority, the owner of the said brand name can not allow the other person to use the said brand name for country liquor. If the State Excise authority finds that a brand name owner has allowed other person to use the brand name without obtaining permission from the State Excise authority, the State Excise department can confiscate the liquor and also can prosecute both the brand owner as well as the brand user. 6.9 Thus in view of the facts in law the respondents submit that the demand is not sustainable on merits as well as part of the said demand is also not sustainable on the point of limitation. As the demand is not sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing charge + profit margin/royalty @ ₹ 18 per case. The balance of sales proceeds is retained by M/s Talreja Trade towards packing materials + labor payments made on behalf of respondent + margin. v) The arrangement is on Principal to Principal basis. M/s Talreja Trade, for granting sole-selling right have guaranteed a minimum return per month to the respondent, being @ ₹ 18 per case for 50,000 cases or ₹ 9,00,000/- per month. vi) Further, stated that this arrangement is not a job work. The payment formula takes care of increase/decrease in cost taxes and at the same time assures constant profit per case to the respondent. vii) M/s Talreja Trade is not responsible for making payment for unsold stock or loss in storage by respondent. viii) In response to query for repayable interest free deposit made with respondent by M/s Talreja Trade to facilitate, acquisition of 'Automatic belt conveyor' and 'storage tanks' it was stated that the same is in the business interest of both the parties and is on business like terms. 8.8 That on perusing the agreements dated 10.04.2002 and 01.01.2006, it is noticed that the agreements are more or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try liquor activity incurred by Krishna and collectively called process charges . On the basis of - a) For minimum 60,000 cases per month at the rate of ₹ 6.26 b) For 60,000 to 75,000 cases i.e. for 15,000 cases additional sale ₹ 5.45 c) For 75,000 to 1,00,000 cases i.e. for additional 25,000 cases sale ₹ 4.00. (Or revised amount on revision of water and electricity charges) per case. e) For transport fee, administrative fee, any tax, duty, cess or fee chargeable under any law for the time being in force for the production, storage and sale of country liquor At actual cost of Krishna f) Transport fee For the time being, Krishna has obtained a stay order from the High Court at Mumbai, against transport fees on rectified spirit and the Agent has agreed to deposit the amount equivalent to transport fee on rectified spirit consumed during the month or provide a Bank Guarantee on concurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified spirit, the Agent shall be required to pay before issue of the spirit by Krishna Distillery. (a) For essences, corrugated boxes and process charges, the Agent shall within 10 days of the end of each month, pay the amount to which it pertains to the concerned Parties. (b) For any tax, cess, fee or charges, the Agent shall pay on the same day of presentation of debit note with supporting documents. However, sales tax on the sale of country liquor during the month, shall be paid by the 10th of the next month. (c) For guaranteed minimum margin for ₹ 14,55,600/- of minimum 60,000 cases per month. The Agent shall pay within 10 days of the end of each month, in addition to power charges. (d) Any other payment shall be made by the Agent within 10 days of the demand raised by Krishna. Failure of the Agent to pay any one of the aforesaid sums on the dates stated above, shall attract levy of interest at the prevailing interest rate of Satara District Central Co-operative Bank Ltd. 8.9 Few other clauses of the agreement, relevant are as follows:- 14. The brands under which country liquor is presently being produced and shall be produced in future by Krishna wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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