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TMI Blog2008 (12) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ingh Kandhari, Partner Mr. J.P. Kaushik, Advocate for the Appellants. Mr. V.Kumar, DR for the Respondent. [Order per: M. Veeraiyan, Member (Technical)] (for the Bench):- 1.1 Appeal No.ST/85 of 2007 is filed by M/s. H.K. Associates challenging demand of service tax amounting to Rs.60,10,268/- and imposing equal amount of combined penalty under section 76, 77 and 78 of the Act. 1.2 Appeal Nos. 263/07 is filed by the Department seeking modification of the order of the Commissioner and consequently seeking separate penalties as provided under each of the sections 76, 77 and 78 on M/s. HK Associates. The other three appeals are also filed by the department against the order of the Commissioner in not imposing penalties on M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KBPL and a partner of M/s. H.K. Associates, proposing demand of duty from M/s. H.K. Associates and proposing imposition of penalty on all the four parties. (d) Commissioner confirmed the demand of service tax as proposed in the show cause notice from M/s. H.K. Associates and imposed a combined penalty under section 76 and 77 and 78 of the Act and dropped proceedings against the other three parties. 4. Learned advocate appearing for the parties made the following submissions. (a) The agreements dated 3.5.99 and 1.4.03 were for the purpose of collecting promptly the sale proceeds from various dealers to whom KBPL sold the goods. The agreement specifically envisages that advertisement expenses are to be borne by KBPL. The payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt as commission and accounted the same as commission in their books of accounts and balance sheets. Merely because a portion of the sum was spent on advertisement by H.K. Associates, the entire amount of about Rs.9 crores received from KBPL cannot be treated as representing payment for rendering advertisement service. M/s. H.K. Associates have not rendered any service as advertising agency. (e) The service of advertisement has actually been rendered only by the firms/persons who undertake the painting/ advertisement. 5. Learned SDR made the following submissions: (a) The claim of the parties that 2-3% of sale proceeds were received merely for the purpose of collecting cheques from the dealers is not logical or reasonable. Out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 1.4.03 is an amended version of the agreement dated 3.5.95, as it restricted the area to Punjab and Haryana only and the commission was enhanced to 3%. Further, the amounts in pursuance to these agreements are admittedly paid by KBPL to M/s. H.K. Associates over the years. These amounts have been admittedly reflected in the balance sheets of KBPL as well as those of M/s. H.K. Associates as commission for sale. 6.2 The learned DR submits that the payment of commission at the rate of 2% /3% for the purpose of a simple assignment of collecting the cheques as claimed by them is very much the higher side. It was also pointed out by the learned DR that out of amounts paid to M/s. H.K. Associates, substantial amounts have been paid to the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as advertising agency and the entire amount of about Rs.9 crores received from KBPL has to be treated as representing payment for rendering advertising services. 7.3. We have also perused the notes given in the balance sheets of KBPL. For example, in the balance sheet for the year 1999-2000, a sum of Rs.4,88,23,638/- is accounted as advertisement and sales promotion expenses. In the schedule Q to the balance sheet relating to the head other expenses, there is a note which clarifies as under:- "Commission on sales amounting to Rs. 1,19,77,790.27 paid to M/s. Harmeet Kandhari & Associates, belonging to a relative of the directors of the company, has been clubbed with the Advertisement & Sales Promotion expenses." Similar c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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