By TIOL News Service

MUMBAI, DEC 21, 2016: THE appellants were selling various items like "Suraksha LPG Rubber Hoses", "Suraksha LPG Hose" as per ISO 9573 etc. through their distribution network. They received an amount as a commission from the manufacturer of LPG Hoses.

Revenue view is that the amount received would be taxable under the category of Business Auxiliary Services. Initially, the appellant resisted the demand but subsequently paid the Service Tax along with interest. Period involved is July, 2003 to February, 2007.

The appellant is before the CESTAT against the portion of order passed by CCE, Mumbai-V imposing penalty.

It is submitted that identical issue was before the Bench in the case of Bharat Petroleum Corporation Ltd. - 2016-TIOL-2798-CESTAT-MUM wherein the Bench upheld the demand of Service Tax liability and interest thereof but set aside the penalty imposed under Section 78 by invoking provisions of Section 73(3) of the Finance Act, 1994.

The AR relied on an identical issued decided in Hindustan Petroleum Corporation Ltd. - 2014-TIOL-2070-CESTAT-MUM and wherein penalties were upheld.

The Bench observed -

"7. … It is not disputed that the appellant had discharged the Service Tax liability and interest thereof (though partial amount of interest was discharged belatedly) on being pointed out by the Revenue authorities. We find that the similar cases have been booked by the authorities against all the Oil Marketing Companies and Service Tax liability has been discharged and Tribunal has been taking a view that the penalty need not be imposed on the PSU's. We perused the agreement in the case in hand and find that the agreement does not indicate that the appellant is required to discharge Service Tax specifically. We are recording this as in the case of HPCL (supra) as produced by the learned AR, the Bench took a call of upholding the penalties imposed at the HPCL, only on the ground that the agreement in that case specifically indicated that the HPCL will get the commission inclusive of Service Tax as applicable. In the case in hand, such clause is absent in the agreement and we are of the view that during the relevant period there could be a doubt as to whether Service Tax liability arises on the amount received as commission on the sale of items manufactured by someone else or otherwise. In our view, this is a fit case for invoking the provisions of Section 80 of the Finance Act, 1994. Accordingly, invoking the provisions of Section 80 of the Finance Act, 1994, we set aside the penalties imposed and dispose of the appeal accordingly."

While upholding the Service Tax liability and interest thereof, the penalty imposed on the appellant was set aside.

(See 2016-TIOL-3281-CESTAT-MUM)