9911796707
TMI Blog2019 (7) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favor of revenue. Determination of value - Production or processing of goods for, or on behalf of, the client - Held that:- The arrangement/agreement for manufacture and sale of branded alcoholic beverages between the appellant and M/s UBL is a complex one; even though the appellant is authorised to sale the manufactured branded beer in the local market, but the customers/indenters are as per the instruction of M/s UBL; the sale price is fixed by M/s UBL after mutual consultation. Thus it is not a simple provision of service agreement, where under, the service is flown from appellant to M/s UBL and the consideration is received against the service rendered. It is the argument advanced on behalf of the revenue that the service charges are adjusted against the sale price, and the balance amount returned to the service receiver out of the sale proceeds of manufactured branded beer for and on behalf M/s UBL. The value of the services needs to be determined keeping in mind the N/N. 39/2009 ST dt. 23.9.2009 and the principles of valuation prescribed under Section 67 of the Finance Act and the Valuation Rules, 2006. The Adjudicating authority has erred in adopting the sale price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , UBL granted non-assignable, non-transferable and non-exhaustive rights to the Appellant to brew the beer under the brand owned by UBL. The Appellant had paid UBL all inclusive consideration of ₹ 5/- per case of beer for usage of brand names of UBL and UBL has discharged service tax liability on the said amount under Intellectual Property Right Services. The Appellant has undertaken manufacturing of beer on his own and sold the same to third party in the same manner it manufactured and sold beer under on its own brand name. The entire production bearing the brand name of UBL has been sold by the Appellant directly to the customers, distributors of UBL and also to UBL. Such sales are made under invoices raised by the Appellant on all customers including UBL and applicable sales tax was paid by the Appellant. It is his contention that the allegations in the show cause notice is that they have rendered services under the taxable category of business auxiliary service Sec. 65(19) of Finance Act,1994 i.e. under clause (v) "production or processing of goods for, or on behalf of the client", pursuant to the amendment brought to the said definition w.e.f. 01.09.2009. The Revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der has been rendering service under IPR service in terms of Circular No.249/1/2006-CX-4, dt.27.04.2008. Since UBL has already provided service on its beer brands manufactured by the Appellant, on the same transaction again how Appellant could have provided service to UBL. It is his contention that Service tax cannot be calculated at both ends of the same transaction. Referring to Section 67 of the Finance Act, 1994, the learned Advocate has submitted that receipt of consideration is a pre-requisite for service tax levy; in the present case the consideration was for the goods supplied and not for the services rendered. The Appellant had not received any consideration from UBL for rendition of any service. Referring to the Board Circular dt.30.10.2009, he has submitted that the service tax should be payable on bottling, job charges, distribution cost and other reimbursable. As regards the statutory levy, they do not represent consideration for rendering the service. Such amount will not be included in the value for charging service tax. Similarly, the surplus/profit earned by the brand owner being in the nature of business profit, not chargeable to service tax. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amalgamation is done as per Section 17 (2) of Sick Industrial Companies (Miscellaneous Provisions) Act, 1987 and the said Act is having over-riding effect over all other laws for the time being in force. The scheme has attained finality under the said Act. In support, he has referred to the judgment on the issue viz. Marshal & Sons Vs Income Tax Officer - 1997 (2) SCC 302, CCE Trichy Vs IOC Ltd - 2011 (23) SER TR 625. 3.5 He has further contended that once applicable sales tax/VAT is paid on the transaction, service tax is not payable again in relation to the subject transaction. He has referred to the judgment in the case of Idea Mobile Communication - 2006 (4) STR 132 (T), Thermax Ltd Vs CCE Pune-I - 2007 (8) STR 487 (T). 3.6 The learned Advocate has further submitted that extended period of limitation cannot be made applicable as there has been no willful suppression of facts on behalf of the Appellant in manufacturing and selling of beer bearing the brand name of M/s UBL when the consideration paid for use of brand name has already suffered service tax and known to the department. Further, he has submitted that the computation of demand is incorrect as they are entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut, based on which the taxable value of the goods could be arrived at. However, the basic condition to apply the said notification is that the service provider should maintain separate account of receipt, production, inventory and dispatches of goods as well as the financial transaction between the alcoholic beverages manufactured on his own account and manufactured on behalf of another. In the present case, the Appellant has not complied any of the said condition. Further, he has submitted that reliance placed on the Circular of 2008 was erroneous, especially in view of Notification Nol.39/2009 which encompasses various charges liable for arriving at the valuation of the goods. 4.3 Further, rebutting the argument of amalgamation of the Appellant with M/s UBL from the appointed date of 01.04.2010, the learned A.R. has submitted that on verification from division office, it has been ascertained that M/s UBL was issued a service tax registration on 05.12.2012 only for various services on the address of the Appellant. It was submitted that no application for amendment of ST-3 returns had been filed by the Appellant before the jurisdictional authority, therefore, there was no represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that neither copy of the contract was declared to the Department nor the transactions had been mentioned in the ST-3 returns filed by the Appellant. As there was no declaration at any stage to the Department about the said activity pursuant to the brewing agreement, therefore, the Appellant has suppressed the material facts, hence, the demand is rightly confirmed invoking extended period of limitation. 5. Heard both sides at length and perused the records. 6. The issues involved in the present appeal for determination are whether: (i) the Appellants, who manufactured beer, affixed with the Brand name of M/s United Breweries Ltd. and sold under their instruction as per Bottling/Brewing agreement dt.01.4.2005 & 02.3.2009, rendered services under the taxable category of "Business Auxiliary Services" (BAS) and the computation of the demand is correct; (ii) The merger/amalgamation of Appellant Company with M/s United Breweries Ltd. be taken as the appointed date i.e. 01.4.2010 as per the scheme of amalgamation sanctioned by BIFR, Bench-II under Sick Industrial Companies (Miscellaneous Provisions) Act, 1987 or 21.06.2012, the effective date when the certificate of incorporation wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or [Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;] [(v) production or processing of goods for, or on behalf of, the client;] (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, [but does not include any information technology service and any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Central Excise Act,1944. [Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, - (a) "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale or purchase of such goods or services; [(b) "excisable goods" has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944 (1 of 1944); (c) "manufacture" has the meaning assigned to it in clause (f) of section 2 of the Central 11. The change that has been brought into the definition of the BAS w.e.f. 01.9.2009 is the nerve chord of dispute. In the previous definition the exclusion clause was expressed as: "[but does not include any information technology service and any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Central Excise Act,1944." 12. The amendment to the said clause reads as: ", [but does not include any activity that amounts to manufacture of excisable goods. 13. And the meaning of "manufacture" and "excisable goods" mentioned under the said clause read as: "[(b) "excisable goods" has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944 (1 of 1944); (c) "manufacture" has the meaning assigned to it in clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944)." 14. Now, reading both these provisions in juxtaposition prevailing prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been done in the existing taxable services. These changes would come into effect from a date to be notified after the enactment of the Finance (No. 2) Bill, 2009. 3.1 Modification in Business Auxiliary Service (BAS) [section 65(19)] :- It may be recalled that production or processing of goods for or on behalf of a client falls within the purview of this service. However, if any such activity amounts to manufacture within the meaning of section 2(f) of the Central Excise Act, the same is excluded from its purview. This exclusion has been modified to state that it would apply only if the activity results in manufacture of 'excisable goods'. Both the words/phrases i.e. 'manufacture' and 'excisable goods' would have the same meaning as defined under the Central Excise Act. The impact of this change would be that even if a process of manufacture is undertaken for the client, but the resultant product does not fall under the category of excisable goods, such as alcoholic beverages, the service tax would be attracted. Certain other goods which would also fall under BAS on account of the proposed change would be kept outside the tax net by way of exemption notification, to be is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various territories. Under Clause 5.9 of the agreement, it is made clear that the Appellant was manufacturing and disposing UBL's beer to State Beverages Corporation / State regulated Depots or to the wholesellers, indentors holding necessary permit licences under the relevant Excise law and who are authorized to purchase/sale. beer in terms of relevant regulation upon their placing purchase orders/indents on the brewer. Clause 6 which makes it clear that the manufacture is for and behalf M/s UBL reads as follows:- 6. Quantity 6.1 Brewer shall manufacture and dispose off 9,60,000 cases of beer per annum on behalf of UBL. 3,60,000 cases from Aurangabad Brewery and 6,00,000 cases from Dharuhera Brewery. Clause 9.4.5 which reads as follows: In the event of expiration or termination of this Agreement, BREWER shall immediately return to UBL any written embodiments and sell at cost Raw Materials, plates, labels, packaging materials etc and specifications for brewing and packaging UBL beer and shall not howsoever make use of the same after termination or expiration. UBL shall take over the entire stock of all unused labels, unfinished goods, semi-finished goods in process or at l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised the seller to affix the trade mark and the seller was to do so "as an agent" for and on behalf of the buyer and not on his own account. The Respondents M/s Cibatul Limited filed price list declaring the wholesale prices of the manufactured goods. The Assistant Collector revised the wholesale prices upward on the basis of wholesale prices at which the buyer sold the products in the market. The question before Hon'ble Supreme Court was whether the wholesale price of the goods at which it was sold by the seller to the buyer for assessment or the price at which the buyer sold the goods in wholesale in the market be adopted for the purpose of assessment. In these circumstances, the Hon'ble Supreme Court has held that the goods were manufactured by the seller M/s Cibatul Ltd. on his own account and not on behalf of the buyer, hence, the whole sale price at which it was cleared/sold to the buyer M/s Ciba Geigy Ltd. be relevant for excise duty purpose. 25. In Poona Bottling's case, the petitioner was manufacturing and bottling of soft drinks like Gold Spot, Limca, Thums up etc. They are registered with the Central Excise Department for the purpose of manufacturing the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s UBL paid service tax under the category of IPR service on the said amount, hence, it is not a service. At the first blush the argument sounds quite attractive but on deeper analysis will not sustain. The reason for not discharging service tax under Business Auxiliary Services as the amount paid by the Appellant to M/s UBL suffered service tax in the hands of M/s UBL cannot be a valid ground. It is the agreement/arrangement that determines the liability. The arrangement/agreement for manufacture and sale of branded alcoholic beverages between the appellant and M/s UBL is a complex one; even though the appellant is authorised to sale the manufactured branded beer in the local market, but the customers/indenters are as per the instruction of M/s UBL; the sale price is fixed by M/s UBL after mutual consultation. Thus it is not a simple provision of service agreement, where under, the service is flown from appellant to M/s UBL and the consideration is received against the service rendered. It is the argument advanced on behalf of the revenue that the service charges are adjusted against the sale price, and the balance amount returned to the service receiver out of the sale proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Valuation Rules, 2006. The Adjudicating authority has erred in adopting the sale price of the Appellant. 29. The next issue for determination is the date of amalgamation/ merger of the Appellant's unit with M/s United Breweries Ltd. In the scheme of arrangement as per the direction of BIFR for amalgamation of the Appellant's brewery division with M/s United Breweries Ltd., the appointed date and the effective date have been defined under Definition Clause 1.2 & 1.4 of the said scheme, respectively, as follows:- 1.2 "Appointed Date" means the 1st day of April 2010 or such other date as may be approved by the BIFR. 1.4 "Effective Date" means the date of filing of the certified copies of the BIFR Order with the Registrar of Companies, Bangalore. In Clause 2 of the said arrangement, it is mentioned as: 2. Date of Taking Effect and operative date: The scheme shall be deemed to be effective from the appointed date, but shall be operative from the Effective date. 30. The BIFR sanctioned the said Scheme on 11.11.2011 and copy of said Order filed with Registrar of Companies 0n 16.11.2011. It is the contention of the Appellant that the appointed date i.e.01.04.2010 as mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribe any specific date but merely sanction sanctions the scheme prescribed to it - as has happened in this case - it should follow that the date of amalgamation/date of transfer is the date specified in the scheme as "the transfer date". It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1), a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take some time; indeed, they are bound to take some time because several steps provided by Sections 391 and 394-A and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e. the Transferor Company and the Transferee Company may carry on business, as has happened in this case but normally provision is made for thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamation, when the application filed with Registrar of companies that is 23.03.2005. Following the judgment of Hon'ble Supreme Court in Marshall Sons & Co. Ltd.'s case, it is held that the date of amalgamation would be the 'appointed date' presented in the scheme. Further, the Tribunal has observed that even though the said judgment was delivered in the context of Income Tax law, but binding relating to the issues arising under Central Excise Act or under Chapter V of Finance Act, 1994.It is observed as: "10. The law declared by the Apex Court is binding and is required to be followed. The submission of the learned DR that the ratio of the above judgment given in the context of income tax would not be applicable to the facts of the present case as there is no specific provision to that effect under the Central Excise Act or under the Chapter V of the Finance Act, 1994 cannot be appreciated inasmuch as the law declared by the Supreme Court is binding on all the Courts, in terms of the Article 141 of the Indian Constitution. The Hon'ble High Court of Delhi and the Kolkata having held the date of amalgamation as 1-4-2004 has to be considered as the correct date of amalgamation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal was that a refund claim of ₹ 84,76,586/- of service tax paid on royalty paid by the transferee company Usha International Ltd to M/s Joy Engineering Ltd, the transferor Company was filed on the basis of High Court's order dt.26.05.2008 approving the merger w.e.f. 01.04.2007 being the appointed date. This Tribunal, applying the principle laid down in Marshall Sons & Co. and that of Jindal Strips Ltd, held as follows:- "7. In the light of the foregoing binding precedents there remains no scope for any debate that the date of amalgamation in the present case is to be held to be 1-4-2007 and not 20-6-2008. Obvious consequence of this is that the service rendered during the impugned period (1-4-2007 to 31-3-2008) became service to self and consequently service tax paid during the said period became eligible for refund. ……………………………………………………………………………" 37. Revenue has referred to the judgment of Hon'ble Patna High Court in Tata Iron & Steel Co. Ltd's case. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Union Legislation, as envisaged under Section 246 of the Constitution nor the same can be said to be in conflict with the provisions of the Companies Act, 1956. Therefore, the decision of Hon'ble Supreme Court in the case of State of West Bengal & Ors Vs Committee for Protection of Democratic Rights, West Bengal & Ors. (supra) as well as UCO Bank & Ors. Vs Dipak Debbarma & Ors. (supra) relied upon by the learned Counsel for the petitioners shall not be of any assistance to the petitioners. As observed hereinabove, both the Acts operate in different fields and with respect to different eventualities. Therefore, considering the pith and substance of Section 52 of the GVAT Act, it cannot be said to be in conflict with the Union Legislation." 39. Consequently, upholding the constitutional vires Section 62 of GVAT Act, 2003, their Lordships observed as follows:- "28. In view of the above and for the reasons afore stated, it is held that Section 52 of the Gujarat Value Added Tax Act cannot be said to be beyond legislative competence, and therefore, the same cannot be said to be ultra vires to Article 246 & 252 of the Constitution of India. It is held that Section 52 of the GVA ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
