TMI Blog2014 (11) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... sion is payable over and above the commission payable to HPCL distributors. The commission is for the service rendered by HPCL towards marketing/promotion of goods manufactured by the manufacturers mentioned above. The service tax amount has been correctly demanded and the appropriation of the said amount already deposited is correct in law. - Decided against the assessee. Levy of penalty - Waiver of penalty u/s 80 - Held that:- It is clear that they were aware of requirement of payment of service tax under the agreements. But they chose not to pay the tax. For the sake of repetition, it may be mentioned that the appellants are very old assessees. They are a massive organisation with all expertise. Therefore, non-disclosure of agreements amounting to clear suppression of facts does not give them the benefit of doubt and makes them liable for penalty under Section 78. In similar circumstances, penalty would have been imposed on private companies, there appears to be no reason why the appellant should escape penalty on similar ground. - Decided against assessee. - Appeal No. ST/670/11-Mum - Final Order No. A/1546/2014-WZB/C-I(CSTB) - Dated:- 1-10-2014 - Ashok Jindal and P S Pru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994. HPCL was show caused on 29.04.2009 demanding duty of ₹ 3,75,03,657/-, why the said amount paid by them on 11.04.2008 should not be appropriated, interest be demanded under Section 75 of the Act ibid and penalty should not be imposed under Section 76, 77 and 78 of the Act. 3. Heard both sides. 4. The ld. counsel stated that LPG is covered by Essential Commodity Act, 1955 and Rule 3 of Petroleum Products Order, 1972 required the refining company to regulate the supply and distribution of LPG. They were discharging this statutory function up to 31.03.2003 and thereafter on basis of agreement entered into at the instance of the Government. Further statutory prohibitions are imposed on them under LPG (Regulation of supply and Distribution) Order, 2001. These prohibited activities are, inter alia, forced sale of products/hot plates to the consumer. He also referred to Static and Mobile Pressure Vessel Rules, 1981 under Indian Explosives Act, 1984, which lay down the minimum standards for manufacture of goods such as hoses. In short, the contention is that by selling the goods they are only discharging statutory obligations of ensuring safety incidental to which hot plate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to Business Auxiliary Service. Under Section 65(19), Business Auxiliary Service means any service in relation - (i) Promotion or marketing or sale of goods produced or provided by or belonging to the client..................... Thus it is to be examined whether HPCL had rendered service to the manufacturer of these goods which amounts to promotion or marketing of goods/products of the manufacturers. 9. To understand the nature of activities undertaken by HPCL, we may straightaway refer to the agreements with the manufacturers. We may only see the relevant clauses of the agreements, as reproduced below: 9.1 Marketing agreement with M/s. Sidhartha Rubber Pvt. Ltd.: AND WHEREAS both 'HPCL' 'Manufacturer' agree that it is in their own mutual interest to enter into an agreement for co-branding of SURAKSHA LPG HOSE through LPG distributors of 'HPCL' 2.2.... 'HPCL' shall endeavour for promoting SURAKSHA LPG Hose for domestic LPG... 3.1 'HPCL' will through their Distribution network, .. highlight the safety features of SURAKSHA LPG Hose and endorse and support the product by promoting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L may provide necessary space for display of signage in the said LPG Distributorships for visibility ..... 7.0 TTKPL will pay overriding commission to HPCL @ 5% of Distributor Billing Price for every Prestige product sold by the TTTKPL to HPCL LPG distributors on realisation. 9.4 Agreement with M/s. GM Pens International P. Ltd. WHEREAS HPCL and 'GMPIPL' had entered into the agreement dated 15.11.2006 for marketing of CLIPPER range of products (Kitchen Lighters and Refill Gas Cans) through LPG distributors of HPCL on terms and conditions mentioned therein. 4. GMPIPL will pay overriding commission to HPCL @ 10.11 (inclusive of service tax as applicable) for every CLIPPER brand Kitchen lighter and ₹ 4.49 (inclusive of service tax as applicable ) for every refill gas can sold by GMPIPL to HPCL LPG distributors on realisation. 10. From the various agreements entered into by HPCL with manufacturers of hoses, LPG stove, etc, and the clause relating to marketing, business promotion, availing HPCL's distribution network, providing supports by HPCL etc., the only inescapable conclusion that may be drawn is that HPCL are very obviously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs mentioned above. The service tax amount has been correctly demanded and the appropriation of the said amount already deposited is correct in law. 13. The plea taken by the appellant regarding the competence of the same Central Excise officer to adjudicate the notice is, in our view, without substance. The Sections 73(1) and 73(2) only speak of Central Excise officer. There is no doubt that the reference to Central Excise officer means any Central Excise officer who is competent to adjudicate the case and not any particular Central Excise Officer. Strangely, the appellants have also raised an issue to the effect that the show-cause notice does not propose to classify the service before quantifying the demand. This appears to be a total false contention because the show-cause notice, in para 19 as well as in other paras clearly states that HPCL are providing services which are appropriately classifiable under the category of Business Auxiliary Service. The plea has been made without any application of mind. 14. On the issue of penalty, the appellants contend that they acted under bonafide belief and paid service tax liability on their own before issue of show-cause notice. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been exercised arbitrarily, it will not be open for Courts to interfere with the exercise of discretion. Here again it may be stated that these cases are distinguishable from the present case. As discussed above, the appellants actually suppressed the fact that they had entered into agreements with the manufacturers and more so that the agreements provided for inclusion of service tax. The appellants being a registered assessee for a long time well versed in service tax matters chose not to declare the existence of the agreements. They did not take the advice of the department. In fact they did not even make any query to the department as to whether the service tax would be leviable on the service of promotion of business for manufacturers. Their activity very transparently reflects the Business Auxiliary Service provided by them. Therefore, the appellant cannot now take shelter of bonafide belief or that the issue was not free from doubt. 15.2 On the other hand, the matter stands settled by the decision of the Supreme Court in Rajasthan Spinning Weaving Mills 2009 (238) ELT 3 (SC). The question before the Hon'ble Apex Court was whether there was warrant for levy of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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