PER S. S. GARG

1. The present appeal is directed against the impugned order dated 29.11.2010 whereby the Commissioner (Appeals) has confirmed the demand of Rs. 1,70,589/- along with interest and also imposed equal penalty under section 76 & 78 respectively and also imposed penalty of Rs. 10,000/- under Section 77.

2. Briefly the facts of the present case are that the appellant is an operator of M/s BPCL filling station at village Nanakpur, Goindwal Road, Dist. Kapurthala. The said filling stations was company owned company operated outlets of BPCL and the appellant was looking after the receipt and accountal of petroleum products at the COCO outlet including sales to the customers. The company were maintaining daily stock register at said outlet and appellant was reporting daily closing stock to the territory Manager, (Retail) BPCL, Jalandhar. The petroleum products were sold at rates as advised by the company and the amount so collected deposited in BPCL’s bank account. The statutory taxes, charges and expenses of electricity, water, telephone, postage all operation cost were borne by BPCL. As per the appellant they were required to engage sufficient number of persons for carrying out the operation and maintaining and submitting required returns by the due date as per the time fixed by the company.

3. The appellant was also running a Health Club & Fitness Centre in the name and style of M/s Harsha Health Club registered under Section 69 of Finance Act on 24.02.2004 and were paying service tax and also filed ST-3 returns. The registration certificate was surrendered on 31.03.2005 and M/s Harsha Health Club was closed on 31.03.2006. A show cause notice dated 11.09.2007 was issued alleging that the appellant provided services of promotion, marketing of petroleum products, customer care and other auxiliary services on behalf of their client M/s BPCL and are liable to pay service tax under the category of business auxiliary service. The department has also demanded service tax under Health Club and Fitness Club Centre by invoking the extended period of limitation along with interest. The adjudicating authority vide Order-in-Original dated 17.01.2010 confirmed the demand of Rs. 1,90,489/- under Section 73 of the Finance Act along with interest under Section 75 of the Finance act and also imposed penalty of Rs. 1,90,489/- under Section 76 & 78 of the Finance Act and also imposed penalty of Rs. 10,000/- under Section 77. Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals) who confirmed the demand of service tax of Rs. 1,70,589/- along with interest and equal penalty under Section 76 & 78 and imposed penalty of Rs. 10,000/- under Section 77.

4. Heard both parties and perused the record.

5. Ld. Counsel for the appellant submits that impugned order is not sustainable in law and the same has been passed without properly appreciating the facts in the law. He further submits that the appellant was only an operator of BPCL and was looking after the company owned company operated outlet on commission basis and the petroleum products were sold advised by the company and the amount was collected and deposited in BPCL’s bank account. He further submits that the appellant was only getting reimbursement of expenses monthwise viz; salary/wages for manpower, conveyance, tea expenses, contractor remuneration and they have filed the monthwise statement which is on record at page 76 to 81 of appeal paper book. The appellant has also annexed Chartered accountant certificate at page 82 & 83 of appeal paper book showing reimbursement of expenses under various heads.

6. Ld. Counsel also submits that in view of the judgment of the Apex Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (10) GSTL 401 (SC), whereas it has been held that the payment received towards reimbursable expenditure are not includable in the taxable value. He further submits that with effect May 14, 2015 an amendment was made under Section 67 whereby it was provided that such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax, but in the present case the entire period is prior to May, 2015. Similarly, the Ld. Counsel submits that with regard to Health Club and Fitness Centre the appellant was entitled to exemption under Notification 6/2005-ST dated 01.03.2005 because the aggregate value of services of the appellant did not exceed Rs. 4 lakhs.

7. Ld. Counsel further submits that invoking the extended period is also not justified because there was no intention to evade on the part of the appellant and the definition of business auxiliary service were changed from time to time. He further submits that imposition of penalty under both the sections of 76 & 78 of the finance act is bad in law in view of the decision of the Hon’ble Punjab and Haryana High Court in the case of Commissioner of Central Excise Vs. Pannu Property Dealers, Ludhiana reported in 2011 (24) STR 173 (P&H). He further submits that the appellant has deposited Rs. 2,40,598/- vide two TR6 challans both dated 31.05.2007 which also find mentioned in the show cause notice issued by the respondent.

8. On the other hand, Ld. DR reiterated the findings of the impugned order.

9. After considering the submission of both the parties and perusal of the material on record we find that the appellant was only operating the BPCL filling stations which was COCO outlet and were getting reimbursement of expenses as shown by them in their monthwise statement annexed at page 76 to 81 of the paper book. Further, we find that the Chartered Accountant has also certified that the appellant was only getting reimbursement of expenses viz. salary/wages for manpower, conveyance, tea and coffee remuneration of operator.

10. Further, we find that in view of the decision of the Hon’ble Apex Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. cited (Supra) reimbursible expenditure is not includable in the taxable value. We also find that once the appellant has deposited to Rs. 2,40,598/- before the issuance of show cause notice vide two TR6 challans both dated 31.05.2007 which is also noted in the show cause notice then in that situation the show cause notice should not have been issued. Further, we also find that the imposition of penalty under both the Sections 76 & 78 is also not tenable in law in view of the judgment of Punjab and Haryana High Court in the case of Commissioner of Central Excise Vs. Pannu Property Dealers, Ludhiana cited (Supra).

11. In view of these facts and circumstances, we are of the considered opinion that the impugned order is not sustainable in law and therefore, the same is set aside by allowing the present appeal.

12. Order pronounced in the open court on 28.11.2023.