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TMI Blog2014 (11) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... tributors on payment of overriding commission to HPCL. The agreements provided for co-branding of hose pipes (by manufacturers and HPCL) as well as printing logo of both parties on the said goods as well as on the packing material. The manufacturers are to adhere to technical and quality specifications specified in the said agreements. In their statement, personnel of HPCL stated that HPCL promoted the Suraksha concept but not brand per se, the manufacturers of stoves and hose pipes needed BIS approval and the premises of the manufacturers would be inspected to ensure that required standards are met before HPCL entered into agreements with the manufacturers. Revenue's view was that HPCL are undertaking promotional activities on behalf of the manufacturers of the said goods and earned over-riding commission on rates specified in the agreements with the manufacturers. In the case of GM Pens International who manufacture kitchen lighters, the agreement specifically mentioned that GM Pens are paying overriding commission to HPCL inclusive of service tax as applicable. Revenue viewed the activity as promotion or marketing of goods produced by the manufacturer as an activity of HPCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that as service tax was paid before issuance of show-cause notice, no penalty is imposable under Section 78. Penalty is not warranted in view of Section 80 and in absence of mens rea. They relied on the various judgments to support their above pleas. They also stated that interest under Section 75 is not sustainable because the amount of tax was paid before issuance of show-cause notice and relied on Gaurav Mercantile Ltd. 2005 (70) RLT 699 (Bom) and Rashtriya Ispat Nigam 2003 (161) ELT 285 which was upheld by the Supreme Court in 2004 (163) ELT A-53 (SC). In the end it was stated by the ld. counsel that they are only disputing the imposition of penalty. 6. Ld. AR relied on the findings of the Commissioner. In support of his contention that HPCL have provided Business Auxiliary Service, he took us through various clauses in the Marketing agreement of HPCL with M/s. Sidhartha Rubber Pvt. Ltd. (for LPG hoses), with M/s. Super LPG Appliances (for green label stoves), with M/s. TTK Prestige Ltd. (for pressure cookers, and mixer grinders) and with M/s. GM Pens International P. Ltd. (for kitchen lighters). 7. We have carefully considered the submissions made by both sides. 8. The on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Distributors. 7.4 ..... Co-branding details on hose will be given to manufacturer by HPCL, ........ Co-branding marks will be carried out on hose as per requirement of 'HPCL'. 8.2 Agreement with M/s. Super LPG Appliances " WHEREAS 'Party' .... have approached "HPCPL" for marketing of this "Green Label" Series through HPCL. LPG distributor network." 2.2 The party and 'HPCL' have agreed that 'HPCL' shall permit its distributor network, at its discretion to effect sales of "PADMASHREE Brand Green label stoves'... 2.3 ...... 2.4 ....HP Gas Logo (Screen printed) to be provided on each of the stoves supplied by the party to HPCL distributors." 2.7 As this agreement is for co-branding of equipments marketed 3.1 .... The logo of both the parties would appear on such products, packages and all publicity materials. The lay out of such printing on the products, packages and publicity materials would be decided by both the parties to mutual satisfaction... ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k but also add their brand value to the products which attract customers to buy the said goods. Even packing covers for the said goods such as Suraksha, LPG hose, (covers as depicted after para 11 of Adjudication order.) bear the words "promoted by HPCL, Ballard Estate, Mumbai." In our view the above is sufficient evidence to establish that HPCL are providing BAS to the various manufacturers. 11. The appellants have put a weak defence by saying that they are merely endorsing the safety requirements under various regulations cited above. Undoubtedly, the safety regulations which are statutory requirements have to be complied with and the oil companies indeed would have to recommend adherence to such safety regulations. But this does not detract from the fact that the promotion and marketing of goods is being definitely undertaken. Rather, had the purpose of advertisements been only to draw attention to safety requirements, HPCL would not have withdrawn from the responsibility for accidents in case of sub-standard goods. In fact the agreements clearly state that the quality of products will be the sole responsibility of the manufacturers and HPCL will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Karnataka Hon'ble High Court that as per Section 73(3), once service tax and interest is paid, the authorities did not have the authority to initiate proceedings for recovery of penalty under Section 76 and the original authority rightly waived the penalty under Section 80 of the Finance Act, 1994 after recording proper reasons. We find these cases are distinguishable from the facts of the present case. In the present case, firstly interest has not been paid. Secondly, section 73(3) proviso clearly provides that the sub-section (3) will not apply in cases of wilful misstatement or suppression of facts with intention to evade payment. 14.2 As discussed in preceding paras, we have noted that the agreements between HPCL and the manufacturers GM Pen clearly provided for over-riding commission on a value which will be inclusive of service tax. It will be very naive to accept the contention that the appellant were under bonafide belief that service tax is not payable especially when they are a massive organisation with enough expertise to handle their taxation matters. The agreement specifically indicates that the overriding commission is inclusive of service tax. In the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed equal to the duty determined under sub-section 2 of Section 11A. This is what Dharmendra Textile Processors 2008 (231) ELT 3 (SC) decides." The provisions of Service Tax Act, 1994 on penalty are para materia to the provisions of Central Excise Act. In the present case under consideration it has been shown above that there was wilful suppression of facts. The act of non-disclosure of agreements and the glaring non-disclosure of fact that an agreement stipulated that commission includes service tax cannot find shelter under the plea of bonafide belief. The appellant could only have evaded duty intentionally by suppressing these facts. Hence the Section 78 leaves no discretion but to impose penalty equal to the duty confirmed. 16. The appellants have emphasised that government undertakings have no intention to evade duty. They have relied upon.... 1) Markfed Refined Oil & Allied 2008 (229) ELt 557 (T) upheld by Punjab & Haryana High Court 2009 (243) ELT A91 2) Indian Oil Corporation Ltd. 2013 (291) ELT 449 (T) 3) CESTAT Order no. A/1191/13/CSTB/C-I dated 28.05.2013 in Balmer Lawrie & Co. Ltd. 4) H ..... 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