Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 1-9-2017 – Though we are now in an era where goods and services, both shall be taxed under one tax, i.e. Goods and Services Tax (GST), the indirect tax Tribunal, CESTAT has recently settled a confusion or dispute on taxability of brand promotions activities as business auxiliary services. In GST, it would remain a service only. The case on hand is Datamini Technologies (India) Ltd. v. CCE, Thane-I 2016 (12) TMI 1535 – CESTAT MUMBAI = (2017) 51 STR 145 (Cestat, Mumbai-TM) which is a majority order after reference to third member. It is a common order for Datamini and Zenith Computers Ltd. The activities involved are of promotion of a brand, logos of Intel Corporation and Microsoft Corporation, suppliers of components of personal computers manufactured by the assessee which were incorporated as foot note to the advertisements of personal computers. The revenue demanded Service Tax under business auxiliary services on the
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ure personal computer. The portion of definition relating to sale of goods referred to in Section 65(19) (i) of Finance Act, 1994 will not apply. Assessees are manufacturers of branded products and it cannot be inferred that in process of promoting their own products, they marketed components in personal computers for consideration paid by Intel Corporation and Microsoft Corporation. Assessees are reimbursed some portion of cost of advertising and publicity conducted upon inclusion of logos of two entities in their advertising and publicity material. The reimbursements are drawn from a fund created out of contribution of two entities that is directly linked to purchases effected in past by assessee. There is no connect between source of contribution for publicity campaign and outcome of publicity campaign. The scale and reputation of assessee is incomparable with two global giants. It is therefore, difficult to conceive that products of these two entities will find additional acceptabi
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iliary service'. Since there was a difference of opinion, the following question was refereed to third member for decision by majority: Whether the Member (Judicial) is correct in holding that the appellants are engaged in the activity of promoting the brand of Intel Microsoft consequently, the activity of 'promotion or marketing of logo or brand' does not cover under the category of Business Auxiliary Service by relying on the judgment of Jetlite (India) Ltd. 2010 (12) TMI 40 – CESTAT, NEW DELHI . Tax under Section 65(105)(zzb) of Finance Act, 1994 is liable upon rendering of 'service provided or to be provided to a client by any person in relation to business auxiliary service'. Section 65(19) of Finance Act, 1994 defines the activity thus – 'Business Auxiliary Service' means any service in relation to – promotion or marketing or sale of goods produced or provided by or belonging to the client; or promotion or marketing of service provided by the client; o
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ibing an organized discipline in management of commercial organizations. In the context of its employment in the definition supra, it would appear that legislative intent tends towards the latter. Marketing professionals consider the four Ps to be at the very foundation of their vocation, viz., price, product, promotion, and place. Unless all the four facets are mixed in the formulation of strategy, the expression 'marketing' may not be an appropriate usage and will not apply to the activity undertaken by the appellants. It is the products that, if at all, may be alleged to be the object of such promotion. 'Promotion of brand' as a taxable service was, as yet, an unheard of activity in the realm of taxable services; and rigorous delineation of brand and product is received wisdom which certainly could not have weighed with the authority issuing the notice or the adjudicating authority. Appellants are manufacturers of branded products and, by no stretch of imagination, c
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scale and reputation, appellants are incomparable with the two global giants. It is difficult to conceive that the products of these two entities will find additional acceptability in the market owing to the inclusion of their respective logos. The products themselves are amenable to utilization only by computer manufacturers and the publicity, if any, among the potential customers of the two appellants is unlikely to derive any economic benefits to the supplier. On the contrary, the products of the appellant are likely to find greater acceptance among potential customers owing to the acknowledged incorporation of the products of Intel and Microsoft in the computers manufactured by the appellants. Such a reversal of roles would alter the relationship in a manner that was not contemplated in the show cause notice. That the reimbursements are circumscribed by funds added in proportion to the procurements effected by the appellants from the two suppliers and not from enhanced sales attri
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