Purchase-and-resale with VAT not Business Auxiliary Services; threshold exemption and penalty relief followed after turnover verification.

A genuine purchase-and-resale arrangement, where title passes to the buyer and VAT is paid on onward sales, was treated as sale activity rather than promotion of the principal's business, so commission or discount earned on resale was not taxable as Business Auxiliary Services. Threshold exemption under Notification No. 8/2008-ST was also available where turnover fell within the notified limit; denial based only on non-registration and non-filing of returns was not sustained. As the exemption applied, the penalty could not survive. The matter was remanded only for limited verification of turnover, while the tax demand and penalties were deleted.

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Issues: (i) Whether the activity of purchasing goods from the principal and reselling them on payment of VAT could be treated as taxable Business Auxiliary Services on the commission or discount earned; (ii) Whether the assessee was entitled to threshold exemption under Notification No. 8/2008-ST and consequential relief from penalty.

Issue (i): Whether the activity of purchasing goods from the principal and reselling them on payment of VAT could be treated as taxable Business Auxiliary Services on the commission or discount earned.

Analysis: The goods were purchased from the principal, title passed to the assessee, and the goods were thereafter resold on invoices issued to customers with VAT paid on the sales. In these circumstances, the activity was found to be one of sale and resale, not promotion of the principal's sales so as to attract Business Auxiliary Services. The payment of VAT on the sales was treated as consistent with the existence of a genuine sale transaction.

Conclusion: The demand on the commission or discount received on resale was not sustainable.

Issue (ii): Whether the assessee was entitled to threshold exemption under Notification No. 8/2008-ST and consequential relief from penalty.

Analysis: The turnover reflected in the impugned order was stated to be within the threshold limit for the relevant financial years, and the denial of exemption was based on non-registration and non-filing of returns. The Tribunal held that the limited question was verification of the turnover for threshold exemption, and once the exemption applied, the penalty could not survive.

Conclusion: The assessee was entitled to threshold exemption, and the matter was remanded for limited verification of turnover; the penalties were deleted.

Final Conclusion: The Revenue's challenge failed, while the assessee obtained substantive relief on taxability, exemption, and penalty, with only limited verification left open on remand.

Ratio Decidendi: A genuine purchase-and-resale transaction on which VAT has been paid cannot be recharacterised as taxable service merely because a commission or discount is earned, and threshold exemption must be granted where the turnover falls within the notified limit.

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