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TMI Blog2015 (4) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants have been able to show that these amounts were actually expenses at their hands, which is also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have generated an income for them and not expenses. Advertising and Marketing Expenses in Foreign Currency - The appellants claimed and submitted details showing that out of the expenses on advertising service, for payments made to various advertising agencies abroad, they have paid the service tax under reverse charge mechanism along with interest for the period 2006-07 to 2011-12. They had not paid service tax upto 2005-06 on such payments as the reverse charge mechanism came into effect with the introduction of Section 66A in the Finance Act, 1994 with effect from 18.04.2006. That the "reverse charge mechanism" did not have any legal basis prior to 18.04.2006 is no longer res integra and, therefore, idle parade of familiar judicial pronouncements in this regard (like Indian National Shipowners A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraphs from the adjudication order. However, it was felt necessary in the present case to do so to drive home the point that the adjudicating authority has been highly and conspicuously non-speaking, non-reasoned, arbitrary and cavalier while passing the impugned order. Non-application of mind (on the part of the adjudicating authority) is indeed writ bold and large across the impugned order. Such orders adversely and severely impinge upon the public's trust in the public authorities and for that reason a public authority displaying such egregiously irresponsible conduct and that too while performing quasi-judicial functions deserves to the put to costs. Accordingly, we set aside the impugned order - Costs imposed - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the appellants vis-a-vis the grounds adopted by the adjudicating authority for confirming the same as the ld. Departmental Representative merely reiterated the grounds contained in the impugned order simply adding that the case may be remanded. 3. With regard to "travelling expenses" component of foreign currency expenditure, the appellants contended that these expenses represented the foreign travel expenses of their employees which were reimbursed to them and the same were not in relation to any taxable service. The adjudicating authority duly recorded the appellants submissions in para 36(V) of the impugned order as under:- "V. FOREIGN CURRENCY PAYMENTS:- TRAVELLING EXPENSES Travelling expenses: With regard to travelling expenses, we submit that it has been undertaken for business purposes. If such travels are undertaken for business purposes then no service tax will get attracted as there is no service provider in such cases. However no reason has been given for levy of service tax on travelling expenses. We submit that under the reverse charge method in case of foreign service payments only when the company avails some service from a foreign service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the expenses were reimbursed to the employee. Pages 3 to 5 are the copies of Air Ticket, Hotel BUI and Restaurant Bill respectively. However, although these trips were for the business purposes but still no service tax has been paid by the party. 53. I find that the figures were taken from the documents adduced by the party. Further, it has shown under the column 'income' side of the Balance Sheet as such the party is liable to pay the demanded service tax." Thus, in spite of noting that these expenses were on foreign trips of employees, the adjudicating authority states "but still no service tax has been paid by the party" without even mentioning for which taxable service. This is shoddy. In any case, the reimbursements made towards travelling expenses are not liable to service tax as there is no evidence that the same are in relation to any taxable service. 4. Regarding the second component relating to "Advertising and Marketing Expenses" in Foreign Currency, the adjudicating authority records the appellants' submissions in para 36(VI) of the impugned order as under:- "VI. FOREIGN CURRENCY PAYMENTS:- ADVERTISING & MARKETING EXPE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary services" whereas in all the above cases quoted in the Show Cause Notice we have paid money to the Indian residents in respect of property taken on rent by us, vehicles taken on rent by us and on cost of expenses paid by us to their parties. In these cases, the best that can be alleged against us is that we are only a service recipient and not a service provider/ Hence calling us to register in respect of the above services, even though we are a service recipient, is contrary to the provisions of law and hence unsustainable. 71. Whereas CBEC vide Notification No.19/2008 dated has further inserted the following explanation in Rule 6 of the Rules, which is as under: "Explanation:- For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called 'Suspense account' or by any other name, in the books of account of a person liable to pay service tax."; 72. The liability to pay Service Tax under reverse charge by the service rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly alt the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. 76. CEBC vide Circular F.No.275/7/2010-CX 8A dated 30.06.2010 provides that: i) in case of taxable services provided by a non resident, not having of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s showing that out of the expenses on advertising service, for payments made to various advertising agencies abroad, they have paid the service tax under reverse charge mechanism along with interest for the period 2006-07 to 2011-12. They had not paid service tax upto 2005-06 on such payments as the reverse charge mechanism came into effect with the introduction of Section 66A in the Finance Act, 1994 with effect from 18.04.2006. That the "reverse charge mechanism" did not have any legal basis prior to 18.04.2006 is no longer res integra and therefore idle parade of familiar judicial pronouncements in this regard (like Indian National Shipowners Assn Vs. Union of India [2009 (13) STR 235 (Bomb) / 2010 (17) STR 557 (SC)]) is avoidable. They also asserted that they had not paid service tax on such foreign exchange expenses shown under this head which related to purchase of materials. In the absence of any evidence to the contrary, as the onus lies on the Department, it will have to be held that Revenue is not able to establish that any more service tax is leviable under this head than what has been discharged by the appellants along with interest. 5. Coming to the componen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pvt. Ltd. (CCIPL), and use the concentrate for manufacture of beverages. The sale or purchase of concentrate is on principal to principal basis and the bottlers do not render any service to CCIPL. The bottlers do not promote the sale of CCIPL's products viz., concentrate as the concentrates cannot be sold to any ultimate consumer and can only be used for making beverages. Whatever marketing or promotion activities carried out by the bottlers are for the purpose of promoting their products only viz., beverages and not for promoting the sale of any products of CCIPL. In this case there is no relationship of service provider and client between the bottler and CCIPL. 43. Our bottlers are the owners of the beverages manufactured out of concentrates sold by M/s. Coca-Cola India Pvt. Ltd. The Excise duty on the beverages manufactured by them is paid by them. The bottlers sell the goods to various distributors and realize the sale proceeds. They have the ownership of the goods viz., beverages manufactured by them. 44. The "marketing support" appearing in the profit and loss account represents the discounts/share of cost borne by us in relation to marketing expenses incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice and accordingly not charged any fees for the same, no service tax has been paid. However, is it worth mentioning here that the party is service provider as they have shown this amount in their Balance sheets for providing "Market Support" and are, therefore, liable to pay service tax." It is evident that the adjudicating authority has not undertaken any analysis of the appellants' submissions and merely records a fiat that the appellants are liable to pay service tax in spite of taking note of the appellants' submissions that they did not provide such services and merely reimbursed a part of marketing expenses. On the other hand, the appellants have been able to show that these amounts were actually expenses at their hands, which is also evident from the various schedules of profit and loss account, where they have been booked as expenses. Obviously, therefore, these expenses cannot be relating to the services rendered by the appellants also because if the appellants had actually rendered any such service, it would have generated an income for them and not expenses. 6. Regarding amount of ₹ 4,93,54,11,607/- shown as outstanding balance against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & 57) which are reproduced below:- "55. Whereas, the party vide their letter dated 21.09.10, however, submitted the details of Advertising and Sales Promotion for the period 2008-09 and 2009-10 only. On scrutiny of the same it is revealed that service tax has been charged by the service provider and paid by the party. Details for the period 2005-06 to 2007-08 were not provided by the party. The party also submitted the details of the Expenses in Foreign currency for the period 2005-06 to 2008-09. However, the party did not offer any comments on the leviability and payment of service tax on it. 56. On perusal of the same it is observed that these payments were made by the party for the services received by the party during the impugned period on which, the party was required to pay service tax under reverse charge mechanism. 57. Further, I find that as brought out in the impugned Show Cause Notice, the services of management consultancy were brought into Service Tax net w.e.f. 16.10.98 and Section 65(65) of the Act, as it stood prior to 1-05-06, defined the term 'management consultant' as follows: 'Management consultant means any person who is engaged in provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order), which are reproduced below:- "58. M/s. CCIPL vide their submissions interalia submitted in respect of the said service that again the Department has erroneously construed this as Income from lease property whereas this is an expense in the hands of CCIPL. "The company has taken various warehouse premises under operating lease agreements. These are cancellable and are renewable by mutual consent on mutually agreed terms. Lease payments for the year, included under Rent charges, amounting to ₹ 90,12,787/- (previous year 87,89,420)". It is clear from the above notes that it is an expense in the hands of the company. 59. It is submitted that CCIPL do not own any property in India except the plant premises at Perungut, Pune, wherein the concentrate for beverage bases are manufactured. The entire property is owned by CCIPL and no part of it has been let out to anybody. This plant is owned by CCIPL and it is registered under Central Excise where we manufacture concentrate and sell it to different bottlers in India Other than this there is no property owned by CCIPL or leased/sub-leased by CCIPL to any other company from where any income from lease of prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease of vehicles and service tax demanded on us. Hence the demand raised on this ground is also liable to be dropped." After recording the above submissions, the adjudicating authority does not take any trouble to record even an iota of finding thereon. Needless to say when the vehicles were taken on lease by the appellants, they were the recipient of service and therefore would not be liable to pay the impugned service tax; it not being a case of import of the said service inviting reverse charge mechanism. 9. In the entire impugned order, the only paragraph dealing with the sustainability of invocation of extended period is paragraph 79 which (although reproduced earlier) is again reproduced below:- ''79. I find that the demand was raised on the basis of documents submitted by the party as such it cannot be construed as erroneous. The impugned SCNs are elaborative, categorical and cover all the Rules, Section, etc. The service tax amount payable is rightly demanded and extended period proviso is invokable for the reasons stated supra" It is pertinent to mention that in the impugned order hardly any such reasons had been "stated supra". Obviously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igures adopted by him for levy of service tax. Obviously, the adjudicating authority seems to equate "best judgement" with "arbitrary judgement" little realising that arbitrariness is an anathema in law. The adjudicating authority is not even sure whether Section 72 is invokable as is evident from the word "appears" appearing the first sentence of para 78 quoted above. Needless to say, such arbitrary "best judgement" assessment of value is not sustainable quasi-judicially. However, in view of the foregoing, quibbling over the so called "best judgement" figures is at best of academic interest. 11. In the context of this order, the following observations of the Supreme Court in the case of Union of India Vs. M.L. Capoor [AIR 1974 SC 87] are really appropriate:- "Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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