CESTAT, AHMEDABAD BENCH
Commissioner of Central Excise
M.V. RAVINDRAN, JUDICIAL MEMBER
ORDER NO. A/506/WZB/AHD of 2012
APPEAL NO. ST/238 of 2010
APRIL 11, 2012
1. This appeal is filed against order-in-appeal No. 50/2010/COMMR(A)/RAJ, dt. 19.02.10.
2. Heard both sides and perused the records.
3. The issue in this appeal is regarding the setting aside of penalty under Section 78 of the Finance Act, 1994 imposed by the adjudicating authority and upheld by the first appellate authority.
4. The facts are in much in dispute. The appellant is a distributor of SIM cards of Vodafone Essar Gujarat Ltd and were given commission on the sale on such products from their principal. The allegation is appellant had not discharged the service tax liability on the said SIM cards during the period April 2003 to September 2007. On being pointed out by the lower authorities that the appellant is liable to discharge service tax liability on the amount received by them as a commission, he discharged the service tax liability along with the interest in August 2008. The Revenue Authorities issued a show-cause notice dated 13.10.08 to the appellant for the demand of the interest and also for imposition of various penalties. Show-cause notice was adjudicated and the adjudicating authority imposed the penalties tinder Sections 76, 77 & 78 and also appropriated the amount paid by the appellant. Aggrieved by such an order, appellant preferred an appeal before the first appellate authority. The first appellate authority upheld the confirmation of the demand, interest thereof and also upheld the penalty imposed under Section 78 while setting aside the penalty under Section 76 & 77 of the Finance Act, 1994. The appellant is aggrieved by such an order and’ is before this Tribunal. Revenue as not filed any appeal against the order passed by the first appellate authority.
5. The ld. counsel would submit that the appellant entertained a bona fide belief that they are not liable to pay the service tax on the amount received by them as a commission from Vodafone Essar Gujarat Ltd. He would submit that the provisions of Section 73(3) would be applicable in this case. It is his submission that the provisions of Section 73(3) only requires the discharge of sendee tax liability and interest thereof and does not require discharge of penalty. He also submits that the bona fide belief of the appellant that activity which has been undertaken by him would not get covered under the service tax liability, as during the relevant period Tribunal in the following judgments has held that such an activity will not amount to rendering of services.
1. South East Corp. v. CCE&ST  22 STT 446 (Bang. – CESTAT)
2. Pink City Communications v. CST [Final order No. 297/2008-SM (BR) (PB), dated 18-1-2008]
3. R. Venkataramanan v. CCE  16 STT 488 (Chennai – CESTAT)
5.1 Ld. departmental representative on the other hand would submit that provisions of Section 73(3) will not be applicable in this case as provisions of Section 73(4) are attracted wherein, demand has been made by invoking the extended period. As regards the bona fide belief, it is his submission that the appellant has taken registration in the year 2004, but had not paid the service tax liability despite taking the registration certificate. It is also his submission that the judgments cited by the assessee are distinguishable as in that case the entire service tax liability was paid by the provider of the telephone services while in this case it is not very clear whether Vodafone Essar Gujarat Ltd. has discharged the service tax liability on the prepaid SIM cards.
6. I have considered the submissions made at length by both sides.
7. The issue involved in this case is regarding the penalty imposed on the appellant under Section 78 of the Finance Act, 1994.
8. It is undisputed that the appellant has discharged the service tax liability on him under the category Business Auxiliary Services for the period before the issuance of show-cause notice. The interest thereof has also been discharged by him.
9. I find that the activity rendered by the appellant is of purchasing of prepaid SIM cards from Vodafone Essar Gujarat Ltd. and selling them to the ultimate customers or through dealers. For doing such an activity, M/s. Vodafone Essar Gujarat Ltd. given an amount as a commission which according to the Revenue is liable for service tax. I find that the issue involved in this case is of service tax liability on the commission received was the question in dispute before the Tribunal in various matters. Recent judgment of the Tribunal in the case of Idea Cellular selling SIM cards has held that it will amount to rendering of services. In my considered view, appellant could have entertained a bona fide belief that there is no liability for services rendered during the relevant period.
10. In view of the foregoing, in my considered opinion, benefit of Section 80 of the Finance Act, 1944 can be extended to the appellant in this case. Invoking the discretion given under provisions of Section 80, I find that the appellant has given a justifiable reason for setting aside the penalty imposed under Section 78 of the Finance Act, 1994.
11. The impugned order to the extent is challenged before me for the imposition of penalty under Section 78 to the extent appeal is allowed.