2016 (12) TMI 1532 - AT - Service Tax

Taxability - commission received - sale of branded hoses - Whether the appellant is required to discharge the Service Tax liability on the amount received as commission during the period July 2003 to February 2007 in respect of the goods sold by them? - section 80 - Held that - in the case of Hindustan Petroleum Corporation Ltd. Vs. Commissioner of Central Excise Mumbai 2014 (11) TMI 166 - CESTAT MUMBAI 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 - section 80 invoked - penalty set aside - tax and interest upheld - appeal disposed off - decided partly in favor of assessee.

Summary

Issues:
Service Tax liability on commission received for goods sold by appellant.

Analysis:
The appeal challenged an Order-in-Original passed by the Commissioner of Central Excise, Mumbai-V regarding the Service Tax liability on the commission received by the appellant for selling goods. The main issue was whether the appellant should discharge Service Tax on the commission received between July 2003 to February 2007 for selling items like "Suraksha LPG Rubber Hoses" and "Suraksha LPG Hose" through their distribution network.

The Revenue argued that the commission received should be taxable under Business Auxiliary Services. Initially, the appellant resisted the demand but later paid the Service Tax along with interest. The appellant's counsel referred to a similar case involving Bharat Petroleum Corporation Ltd. where the demand for Service Tax liability was upheld but the penalty was set aside. They also cited a Tribunal decision upheld by the Supreme Court in a different case.

The appellant's counsel highlighted that the appellant had paid the balance interest subsequently. The Revenue cited a case involving Hindustan Petroleum Corporation Ltd. where penalties were upheld. After considering both sides, the Tribunal noted that the issue revolved around the Service Tax liability on the commission received by the appellant for selling branded hoses of another manufacturer.

The Tribunal observed that the appellant had paid the Service Tax liability and interest, even though some interest was paid belatedly. They found that the agreement did not specifically mention the requirement to discharge Service Tax. Comparing with a case involving HPCL, where penalties were upheld due to a specific clause in the agreement, the Tribunal concluded that there could have been doubt regarding the Service Tax liability during the relevant period. Therefore, the Tribunal invoked Section 80 of the Finance Act, 1994, setting aside the penalties imposed on the appellant while upholding the Service Tax liability and interest.

In conclusion, the Tribunal upheld the Service Tax liability and interest but set aside the penalty imposed on the appellant in this case.