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2018 (9) TMI 1665 - AT - Service TaxIntellectual Property Service - Extended period of limitation - Appellant refined crude edible palm oil belonging to others, affixed their brand name ROOBINI on the packages and collected brand royalty commission of ₹ 100/- per MT from such clients - Held that - It is not the case that the appellant had informed the department about these transactions in ER-I returns. This being so, the extended period, can very well be invoked and hence the entire demand of service tax of ₹ 1,74,782/- with interest thereon is not being interfered with - However, taking into consideration that the issue was interpretational and there was reasonable cause for the failure to pay tax, the penalties imposed are set aside. Demand of ₹ 41,820/- under C&F Agent Service - Held that - Following the ratio in Kulcip Medicines (P) Ltd. 2009 (2) TMI 89 - PUNJAB AND HARYANA HIGH COURT , the demand is unsustainable and requires to be set aside - Demand set aside. Appeal allowed in part.
Issues:
1. Service tax liability on brand royalty commission received by the appellants. 2. Imposition of penalties for interpretational issues. 3. Demand of service tax under C&F Agents service. Analysis: Issue 1: Service tax liability on brand royalty commission The appellants, engaged in the manufacture of edible palm oil, received brand royalty commission for affixing their brand name on packages of refined crude edible palm oil belonging to others. The Department contended that these amounts are exigible to service tax under 'Intellectual Property Service.' Two show cause notices were issued proposing demands for different periods. The adjudicating authority and the Commissioner (Appeals) confirmed the demands. The appellants conceded to the demand for one period but contested penalties on interpretational grounds. The Tribunal upheld the demand but set aside the penalties, noting the interpretational nature of the issue. Issue 2: Imposition of penalties for interpretational issues Regarding the demand for another period, the appellants did not contest the service tax liability under Intellectual Property Right for the normal period. However, they argued that penalties should not be imposed as the extended period of limitation was invoked and penalties were interpretational. The Tribunal confirmed the demand but set aside the penalties, considering the interpretational nature of the issue and lack of disclosure in ER-I returns. Issue 3: Demand of service tax under C&F Agents service The Commissioner (Appeals) relied on a Tribunal decision for demanding service tax under C&F Agents service. However, the appellants pointed out that the said decision was overruled by the Hon'ble High Court, which clarified the legislative intention regarding C&F agent services. The Tribunal, following the High Court's ruling, set aside the demand under C&F Agent Service, emphasizing the conjunctive interpretation of the legislative provision. In conclusion, the Tribunal upheld the service tax demands but set aside the penalties imposed for interpretational issues. The demand under C&F Agents service was also set aside based on the High Court's ruling. The refund claim related to the upheld demand was dismissed due to lack of merit.
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