Tribunal upholds Service Tax, interest on commission, sets aside penalty

The Tribunal upheld the Service Tax liability and interest on the commission received by the appellant for selling goods but set aside the penalty imposed, invoking Section 80 of the Finance Act, 1994. The case revolved around whether the appellant should discharge Service Tax on the commission for selling branded hoses. Despite belated payment of some interest, the Tribunal found no specific clause in the agreement mentioning the Service Tax requirement, leading to doubt during the relevant period. Comparing with a similar case involving HPCL, the Tribunal concluded that penalties were not justified in this instance.

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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.

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