2016 (11) TMI 1110 - AT - Service Tax

Levy of tax - operator of COCO retail outlets of M/s Bharat Petroleum Dealers - Business Auxiliary Service - Held that - It is submitted by the appellant in the grounds of appeal that, if the reimbursable expenses are taken into consideration then, the demand of service tax would be much below the threshold level. Taking into consideration this ground submitted by the appellant as well as the fact that the department has withdrawn their contest on the demand, interest, penalty and appeal filed by department having been dismissed, the appeal No.ST/27877/2013 filed by assessee is allowed - decided in favor of assessee and against Department.

Summary

Issues involved: Appeal against service tax demand, interest, and penalties; Department's appeal challenging the sustainability of demand on reimbursable expenses.

Issue 1: Appeal against service tax demand, interest, and penalties

The case involved two appeals arising from the same order in appeal. The assessee, operating COCO retail outlets of M/s Bharat Petroleum Dealers, was alleged by the department to be rendering Business Auxiliary Service to BPCL, leading to a service tax liability. A show cause notice was issued proposing a demand of ?5,62,843 along with interest and penalties. The adjudicating authority confirmed the demand, interest, and penalties under relevant sections of the Finance Act, 1994. However, in the appeal, the Commissioner (Appeals) accepted the contention that the demand on the entire amount received, including reimbursable expenses, was not sustainable. Relying on various judgments, the Commissioner directed the adjudicating authority to re-quantify the demand excluding the reimbursable expenses. Consequently, the appeal filed by the assessee against the confirmation of demand, interest, and penalties was allowed.

Issue 2: Department's appeal challenging the sustainability of demand on reimbursable expenses

The Revenue filed an appeal challenging the Commissioner (Appeals) observation that the demand on reimbursable expenses was not sustainable. During the hearing, the department sought permission to withdraw the appeal as the amount involved was less than 10 lakhs, leading to the dismissal of the department's appeal. The appellant argued that considering the reimbursable expenses would reduce the service tax demand significantly below the threshold level. With the department withdrawing its contest on the demand, interest, and penalties, and the department's appeal being dismissed, the appeal filed by the assessee was allowed. The miscellaneous applications were disposed of accordingly, and the appeals were disposed of in the above terms.

This judgment highlights the process of adjudication in tax matters, the role of the appellate authority in re-quantifying demands, and the impact of departmental decisions on appeal outcomes. It underscores the importance of legal arguments and precedents in tax disputes and showcases the significance of procedural compliance and strategic decisions during litigation.