TMI Blog2010 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... applied for holding the demand to be barred by limitations would act as a reasonable cause for setting aside the penalty in terms of provisions of section 80 - It is settled law that where the breach of law flowed from a bona fide belief that the assessee was not liable to act in the manner prescribed in the statute, penalties should not be imposed - Set aside the penalties imposed upon the appellant - The appeal is allowed by way of remand for quantification of demand within the period of limitation - ST/138/2006 - A/1919/WZB/AHD/2010 - Dated:- 16-12-2010 - MRS. ARCHANA WADHWA, B.S.V. MURTHY, JJ. ORDER Mrs. Archana Wadhwa, Judicial Member The present appeal is against the order of the Commissioner of Central Excise, Vadodara confirming service tax of Rs. 22,38,952 against the appellants for the period 1-7-2003 to 8-7-2004 by holding the services provided by them to the manufacturing unit as covered by the business auxiliary services . In addition he has confirmed the interest and has also imposed penalty of identical amount under section 78 of the Finance Act, 1994. Penalty of Rs. 500 stands imposed under section 75(a) and of Rs. 1,000 under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003-ST dated 20-6-2003. Inasmuch as the notification was withdrawn with effect from 9-7-2004 and the exemption was not available, they got themselves registered and started paying service tax. 6. After scrutinizing the terms of the agreement entered into between IRIL and BNIPL, revenue entertained a view that the services rendered by the appellant was never commission agent service and the same were essentially covered under the definition of business auxiliary services. As such they were required to pay service tax, for which proceedings were initiated by way of issuance of a show cause notice dated 28-3-2005 proposing to confirm the service tax for the period 1-7-2003 to 8-7-2004, by invoking the longer period of limitation. The notice also proposed confirmation of interest and imposition of penalty. The said notice culminated into the impugned order passed by Commissioner. 7. We have heard Shri Bharat Raichandani learned advocate appearing for the appellant along with Shri Jigar Shah, learned advocate and Shri A. Thete, learned SDR appearing for the Revenue. 8. The dispute required to be dissolved in the present appeal relates to the fact as to whether the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices. 11. During the relevant period there was no independent definition of commission agent in the Finance Act. Notification No. 13/03, which exempted the services provided by commission agent defined the said term by way of Explanation as under: Explanation - For the purposes of this notification, commission agent means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase. 12. The services being provided by the appellant to M/s. BNIPL are required to be examined in the light of the above provisions. 13. It transpired during the course of hearing that M/s. IRIL were providing three different types of sales pattern to M/s. BNIPL. Customers of M/s. BNIPL could place direct orders in the name of the appellant and they would issue the invoices to their customers and the goods were directly sent by M/s. BNIPL to the customers. Payments were made by the customers to the appellant as per the invoices raised by them. In turn the appellant made payments to M/s. BNIPL only for the amounts arrived at as transfer price in terms of the provisions of their agreement, while retain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses v. CCE [2009] 21 STT 198 (Bang. - CESTAT) laying down that the agreement indicating receipt of commission by the appellant based on sales of beer, the appellant has to be held as commission agent entitled to exemption under the notification. 15. We hasten to add here that the above decisions holding the assessees as provider of commission agent services were based upon the terms and conditions of the agreement entered into by the assessee with their customers as also the type of services being provided by them. As such, the ratio of the precedent decisions cannot be lifted and applied to the facts of any given case, without ascertaining the factual position, which in turn is based upon the terms and conditions of the agreement. As such it is absolutely necessary to examine the terms and conditions of the agreement, so as to arrive at a finding as to whether the appellant was providing commission agent services or would fall under the definition of business auxiliary services. 16. The agreement entered into between the appellant and M/s. BNIPL is itself nomenclatured as - Marketing Agreement. The preamble of the same reads that whereas - JV is desirous of a maintaining a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods and is to the effect that the appellant shall be solely responsible for the promotion, marketing and advertisement of the goods and all expenses bore in relation to advertisement and promotions of the goods shall be paid for by the appellant. Further it is the responsibility of the appellant to apply for and obtain all permits, consents, licences etc. that may be required under any law, rule, regulation etc. for the time being in force in the Territory, for carrying out its obligations under this agreement. The said agreement stands executed for a period of five years and after the expiry of the said period the same shall stand extended automatically for successive period of two years each unless either party notifies the other of its intention to terminate. 17. When we view the terms and conditions of the said agreement, which the parties have chosen to call as marketing agreement, in the light of the definition of business auxiliary service, as provided under section 65(19), we find that the services required to be provided by the appellant in terms of the said agreement necessarily relate to promotion or marketing or sale of the goods manufactured by the client. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be held as commission agents so as to avail the exemption in terms of Notification No. 13/2003 during the period 1-7-2003 to 8-7-2004. As such we hold that the appellants were liable to pay duty during the said period under the category of business auxiliary services. 18. Learned advocate has also assailed the impugned order on the ground that the noticehaving been issued on 28-3-2005 for the period 1-7-2003 to 8-7-2004 was partially barred by limitation inasmuch as the same goes beyond the normal period of limitation of one year. They have submitted that in the show-cause notice there is no allegation of wilful mis-statement or suppression of facts so as to invoke the longer period. They have also referred to the statement of Shri Swaroop Chand Jain, Senior Deputy General Manager recorded on 4-2-2005, wherein he disclosed that the service tax was not being paid, by treating the services provided by them as commission agent services, which were exempt under Notification No. 13/2003-ST. He has also submitted that as soon as the said exemption was withdrawn with effect from 9-7-2004, they immediately approached the department and obtained the registration. This fact reflects u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, we remand the matter to Commissioner for quantification of demand within the period of limitation. 21. As we have already observed that the appellants were under a bona fide belief, we find that imposition of any penalties upon them in terms of the provisions of sections 75, 76, 77 and 78 would not be justified, in the light of the provisions of section 80 of the Finance Act, which reads to the effect that no penalty is imposable on the assessee in terms of provisions of section 76, 77 or 78, if the assessee proves that there was a reasonable cause for the failure. Reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence acting under the normal circumstances without negligence or inaction for want of bona fides. As we have already held that there was bona fide on the part of the appellant to construe the services being provided by them as commission agent services, the same fact applied for holding the demand to be barred by limitations would act as a reasonable cause for setting aside the penalty in terms of provisions of section 80. It is settled law that where the breach of law flowed from a bona fide be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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