Bottling Pepsi Doesn't Mean Promoting Pepsi's Goods; No Business Auxiliary Service: CESTAT Quashes Service Tax Demand

In a significant relief to SMV Beverages Pvt. Ltd., the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai has held that incentives received from Pepsi Foods for advertising and promotional activities cannot be taxed under Business Auxiliary Service (BAS). The Tribunal followed a Larger Bench ruling which categorically held that section 65(19) of the Finance Act does not cover promotion of brand name or trademark of a client.A Bench comprising Mr. S.K. Mohanty (Judicial Member) and Mr. M.M. Parthiban (Technical Member), while allowing the appeal, of the assessee stated that the appellant was promoting the trademark/brand name of Pepsi Foods, but section 65(19) of the Finance Act does not cover promotion of brand name or trademark of a client. It cannot, therefore, be urged that BAS was provided by the appellant to Pepsi Foods.The assessee, SMV Beverages is a Pepsi bottler manufacturing aerated drinks and packaged water. The Revenue, during audit noticed that the company received “net incentive” and “support and other receipts” from Pepsi Foods for marketing and promotional activities. The Revenue issued a show cause notice demanding service tax on the ground that these activities amounted to BAS promotion of goods of a client. The original authority confirmed the demand, and the Commissioner (Appeals) upheld it.The CESTAT observed that a previous Coordinate Bench had referred the matter to a Larger Bench in view of the Bombay High Court's decision in Coca Cola India Pvt. Ltd.[2009(16) S.T.R. 657 (Bom)] The Larger Bench, however, held that Coca Cola which dealt with CENVAT credit of input services had “no application to BAS” in such cases.The Bench also emphasised that brand promotion became taxable only from 01.07.2010 under Section 65(105)(zzzzq), implying that it was not taxable earlier under BAS.The Bench relying entirely on the Larger Bench ruling and its earlier 2017 decision in SMV's own case, held that the controversy is no longer open for debate.In view of the above, the Bench allowed the appeal of the assessee reinforcing a consistent judicial view that financial support or incentives given to bottlers for brand promotion cannot be taxed as BAS.Case Title: SMV Beverages Private Limited Vs. Commissioner of Central Excise & CustomsCase No: Service Tax Appeal No. 86054 of 2015Appearance for Appellants/Assessee: Ms. Surabhi SinhaAppearance for Respondent/Revenue: Shri Aditya Singh PariharClick Here To Read/Download Order

Bottling Pepsi Doesn't Mean Promoting Pepsi's Goods; No Business Auxiliary Service: CESTAT Quashes Service Tax Demand

Rajnandini Dutta

Tags