No Service Tax On Cost Allocation For Pet-Care Products Of Mars International: CESTAT Hyderabad
The Hyderabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Mars International is not liable to service tax on cost allocations for developing pet-care products. The bench further opined that the arrangement with the group companies did not involve a service provider-service recipient relationship, and therefore, the service...
The Hyderabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Mars International is not liable to service tax on cost allocations for developing pet-care products. The bench further opined that the arrangement with the group companies did not involve a service provider-service recipient relationship, and therefore, the service is not taxable.
ANGAD PRASAD (Judicial Member) and A.K. JYOTISHI (Technical Member) found that the Mars International/assessee is engaged in the manufacture of pet care products or acquires products from co-manufacture. The companies under the agreement are group companies; these companies are doing research for developing the pet care products in-house. Therefore, the services are not taxable under Section 65 (105) (za) of the Finance Act.
In this case, the assessee/M/S Mars International India Pvt. Ltd. was engaged in the trading of chocolates and manufacturing, as well as the sale of pet foods and related accessories. The company, under the agreement, was developing the pet care products in-house.
The assessee incurred expenditure towards enhancing the pet food quality and the manufacturing process for the service received from abroad.
As per the assessee, there is no service involved, as the foreign companies are not rendering any service to the assessee, only allocating common expenses incurred by them and in the absence of a service provider and service receiver relation, no Service Tax can be demanded.
A Service Tax audit for the period April 2006 to October 2011 was conducted by the Audit Commissionerate. A show cause notice was issued wherein demands under various categories of services were proposed for the period April 2006 to March 2011 on the ground that Service Tax is leviable under reverse charge (RCM).
The Commissioner passed the order confirming the demand of Rs. 34,31,662/- under the category of “Goods Transport Agency Service”, for the period October 2006 to March 2011 under Section 73(2) of the Finance Act, 1994.
As per the assessee, the local delivery charges are reimbursements given to distributors and C&F agents on account of various reasons, namely channel expenses, margins, schemes, damages, freight incurred by them for delivering products, and discounts. The distributors and C&F agents take reimbursement of local freight (rickshaw) from the assessee.
The assessee argued that they do not take any services from Goods Transport Agency (GTA), and no consignment note is issued by any GTA to the assessee. Therefore, no Service tax is leviable under Section 65 (105)(zzp) of the Act.
The company under the agreement is for developing the pet care products in house. They are not scientific or technocrat or related institution there is no any service provider or recipient. In these circumstances, order of Commissioner is not sustainable, stated the Tribunal.
The Tribunal opined that the assessee also submitted that there was no field in the ST-3 returns to declare information relating to agreements for secondment; it could not be, as the suppression of facts on the assessee's part. Therefore, there is no suppression of facts and therefore, an extended period of limitation is not invokable.
In view of the above, the Tribunal allowed the appeal.
Case Title: M/s Mars International India Pvt. Ltd. v. Commissioner Of Central Tax, Hyderabad - II
Case Number: Service Tax Appeal No. 22990 of 2014
Counsel for Appellant/ Assessee: Deepak Suneja and Manish Sachdeva
Counsel for Respondent/ Department: B. Sangameshwar Rao