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ST - BSS - appellant managing distillery & country liquor by undertaking manufacturing as well as sale - no evidence to show that appellant had received any amount for any service in relation to manufacture & distribution: CESTAT

By TIOL News Service

MUMBAI, JUNE 18, 2014: THE appellants entered into an agreement with M/s. The Kolhapur Sugar Mills Ltd. for managing the business of distillery division and country liquor division.

The CCE, Kolhapur issued SCNs demanding service tax on the ground that the appellants provided "Business Support Service" to M/s. The Kolhapur Sugar Mills Ltd.

The adjudicating authority confirmed the demands of Rs.4,39,66,593/- and Rs.85,40,423/- respectively along with interest & penalties.

The appellant is, therefore, before the CESTAT.

It is submitted that for the same agreement, the Revenue directed M/s. The Kolhapur Sugar Mills Ltd. vide letter dated 23rd August 2006 to pay service tax under the category of "Franchise service" and M/s. The Kolhapur Sugar Mills Ltd. is regularly paying service tax as per the directions of the Revenue.

The appellant also submits that as per the terms and conditions of the agreement with M/s. The Kolhapur Sugar Mills Ltd. the appellants are to pay Rs.30 lakhs per annum for use of plant and machinery of the distillery units; that the appellants are not receiving any amount from M/s. The Kolhapur Sugar Mills Ltd. Inasmuch as since the appellants have undertaken the activity of manufacture and distribution of the products manufactured in the distillery division, therefore, it cannot be said that the appellants have provided any 'Business Support service' to M/s. The Kolhapur Sugar Mills Ltd. Suffice to say, the appellants contended that the demand is not sustainable.

The Revenue representative reiterated the findings of the adjudicating authority.

The Bench, after extracting the definition of 'Support services of business or commerce' appearing in s.65(104c) and noting the contents of the agreement observed -

++ The appellants had actually undertaken to manage the business the distillery unit of M/s. Kolhapur Sugar Mills Ltd. and also undertaken the manufacturing activity as well as the sale of products. There is no evidence on record to show that the appellants had received any amount from M/s. Kolhapur Sugar Mills Ltd. for providing any service in relation to the business or commerce or manufacture and distribution of products.

++ Further we find that on the same agreement, almost for the same period, the Revenue directed M/s. Kolhapur Sugar Mills Ltd. to pay service tax under the category of franchise service vide letter dated 23rd August 2006 and M/s. Kolhapur Sugar Mills Ltd. are paying service tax under the category of franchise service regularly and this fact is not in dispute.

Holding that the appellants had not provided any service which can be termed as 'business support service' as provided under Section 65 (104c) of the Finance Act, 1994, the orders passed by the CCE, Kolhapur were set aside and the appeals were allowed.

In passing: A more than five crores illusory demand thus goes to the bin.

(See 2014-TIOL-1053-CESTAT-MUM)


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