Customs, Excise and Gold Tribunal - Mumbai
Coca Cola India Pvt. Ltd. vs Commissioner Of C. Ex. on 16 April, 2007
Equivalent citations: 2008(223)ELT69(TRI-MUMBAI)
ORDER K.K. Agarwal, Member (T)
1. The appellant is engaged in manufacture of concentrates of non alcoholic beverages base. The same are being cleared by them on payment of duty to various bottlers for manufacture of aerated waters/beverages. The appellant is undertaking advertisement for aerated water for manufacture ex-bottlers, which according to them enhance the sale of the aerated water and in turn enhance the sale of concentrates while paying duty on the concentrates. It is their say, that the price at which the duty is paid includes expenses incurred by them in advertisement for aerated water. They took credit of service tax paid on advertisement charges as input service used in or in relation to manufacture of concentrates. However, the same was denied by the Commissioner on ground that the advertisement is on account of final product i.e. aerated waters and not in respect of their concentrates and since the appellant is manufacturing and removing concentrates, for which no advertisement is undertaken, they are not entitled to take credit of the service tax paid on the advertisement. The Commissioner has placed reliance on the Apex Court decision in the case of CCE, Murnbai v. Park international Limited 2006 (198) E.L.T. 486 (S.C.).
2. The learned Advocate for the appellant invited our attention to the explanation of Rule 2 of the Cenvat Credit Rules which reads as under:
Explanation 2. - Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacture;
(1) "Input service" means any service, -
(i) used by a provider of taxable service for providing an output service, or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal.
and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sale promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward' transportation of inputs or capital goods and outward transportation upto the place of removal.
3. It was submitted that the definition of "input services" defined under the Credit Rules is in 3 parts:
Part I : Service used by the provider for providing output services Part II : Services used by the manufacturer, either directly or indirectly, in or in relation to the manufacture of final products and clearances of final products from the place of removal.
Part III : Certain specified services mentioned in the inclusive part of the definition. These are services generally used by a business and ordinary have no relation to the final product.
It was submitted that in order to avail credit of taxable service received by the appellant, he should be covered by either second part or third part of the definition of "input service". There is no dispute to the fact that appellant is a manufacturer of excisable goods i.e. concentrates and therefore services which are used either directly or indirectly in or relation to the manufacture of final products shall be eligible for credit as second part of the definition. For third part of the definition the "Input service" may or may not have any nexus with the manufacturer of final products. These services are like security, coaching and training, recruitment, accounting and auditing which have no nexus with the manufacturing activities but still have been considered as inputs services for the purpose of taking credit. Therefore all advertisements undertaken by the appellant will qualify as input services, credit of which will be available to them.
4. Referring to the Commissioner's finding, that the advertisement undertaken are in respect of final products manufactured by the appellants, it was submitted that the Commissioner has held that the test to determine as to whether an input is used in or in relation to manufacture of final product can be gauged by the fact of inclusion of or non inclusion of value of the input in the value of the final product. Since in their case, the advertisement expenses were included in the value of concentrates, the same has to be considered as input services. The Apex Court's decision in the case of CCE, Mumbai v. Parle International Limited cited supra is distinguishable as in that case the advertisement expenses were not incurred by the manufacturing unit but by third party and was therefore held not liable to be included in the assessable value. In the present case, the advertisements are undertaken by the appellant himself for promoting the sale of his concentrates, and therefore credit on the same cannot be denied.
5. We have considered the submission. We find that it is admitted fact that advertisement is undertaken not for the promotion of concentrates but for promotion of sales of aerated waters manufactured out of concentrates which are manufactured by bottlers and not the appellant. This cannot be considered to be covered by the definition as being input services used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products. Since in the present case, the products are concentrates, advertisement for aerated waters cannot be considered as an advertisement for concentrates. They are therefore clearly not covered by the second part of the definition of "input service". As regards third part though the some services, which seemingly appears to be not related to the manufacture have never less been considered as in or in relation to the manufacture of final products, services relating to advertisement or sales promotion have to be for the final products only and not for advertisement of products not manufactured at all by appellant. This is also supported by the decision of the Tribunal in the case of Pepsi Foods Limited v. CCE in which it was held that advertisement costs of the aerated waters promoted the marketability of the final product i.e. aerated waters and was not includible in the value of the base essence. An appeal against this decision was dismissed by the Hon'ble Supreme Court. A similar view has been taken by the Hon'ble Supreme Court in the case of CCE, Mitmbai v. Parle International Limited. The order passed by the Commissioner is therefore upheld and the appeal is rejected.
(Pronounced in Court)