Transfer of Goods by Sister Concern is ‘Trade’: CESTAT holds against Hindustan Coca Cola [Read Order]

Coca Cola - ITAT - Taxscan

The Hyderabad Bench of Customs, Excise and Service Tax Appellate Tribunal in the appeal M/s. Hindustan Coca Cola Beverages Pvt. Ltd. v. Commissioner of Central Excise, Customs & Service Tax held that the value of goods which the assessee received from the sister plant and sold in the market constitutes ‘trading activity’ and the value of such trading is to be calcuCNlated in the amount of CENVAT Credit to be reversed.

The appellant, a manufacturer of aerated water under the brand names of Coca-Cola, Fanta, Limca, Thumbs Up, Sprite and are paying Central Excise Duty. The appellant is engaged in the manufacture and trade of the goods and in its procurement from its sister units. The appellant has availed CENVAT credit and has opted to avail CENVAT credit on common input services and reverse the CENVAT credit under Rule 6(3A) in respect of exempted goods and services. A Show Cause Notice was served upon the assessee alleging that they have not reversed the CENVAT credit fully in terms of Rule 6 (3A) and hence are liable to pay an amount towards CENVAT credit A penalty and an interest was also proposed to be imposed which was confirmed by the lower authorities.

The appellant submitted that the trading activity undertaken between them and their sister concern is an exempted service while the goods which are manufactured are dutiable goods. Further, that since they are not purchasing bottles from the sister units, selling them further would not amount to trading. Also, since the goods are being received from the sister units under the cover of stock transfer note and the sister unit and the appellants are one at the same entity, the transfer would not amount to ‘trade’.

The departmental representative, on the other hand, contended that the value of goods which the assessee received from the sister plant and sold in the market should also be considered as ‘trading activity’ and the value of such trading should also be calculated in the amount of CENVAT credit to be reversed. Furthermore, reiterating the law, it was contended that even two units which are a single legal entity with common boundary wall should be treated as ‘Separate Central Excise Registrants’ even if they have the same PAN.

The Hon’ble Tribunal after considering submissions of both the parties was of the firm view that the case involved ‘trading’ since the transfer was to be treated as at par with the procurement of bottles from bottlers and selling except from the fact that they are not directly paying their suppliers for the bottles supplied. Hence, the Tribunal further held that the appellant is required to reverse the CENVAT credit as per Rule 6(3A) of the CENVAT Credit Rules, 2004 including the value of these bottles procured from the sister units and thereby selling the same in the market.

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