Custom, Excise & Service Tax Tribunal
Link Well Electronics Pvt Ltd vs Medchal - G S T on 31 October, 2025
1 Appeal No. ST/3252/2012,
21708 & 21709/2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 3252 of 2012
(Arising out of Order-in-Original No. 12/2012-Adjn(ST)(Commr.) dated 17.07.2012
passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad)
M/s Link Well Electronics .. APPELLANT
Pvt Ltd.,
Corp. Office, Link Well House,
2-3-76, 1st Floor,
Tawaipura, Tarbund,
Secunderabad, Hyderabad,
Telangana - 500 009.
VERSUS
Commissioner Of Central Tax .. RESPONDENT
Medchal - GST Kendriya Shulk Bhavan, L.B Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004.
WITH Service Tax Appeal No. 21708 of 2014 (Arising out of Order-in-Appeal No. 12 & 13/2014 (H-II) S.Tax dated 10.02.2014 passed by Commissioner of Customs, Central Excise & Service Tax (Appeals-II), Hyderabad) M/s Link Well Electronics .. APPELLANT Pvt Ltd., Link Well House, 2-3-76, 1st Floor, Tawaipura, Tarbund, Secunderabad, Hyderabad, Telangana - 500 009.
VERSUS
Commissioner Of Central Tax .. RESPONDENT
Medchal - GST
Kendriya Shulk Bhavan,
L.B Stadium Road,
Basheerbagh,Hyderabad,
Telangana - 500 004.
AND
Service Tax Appeal No. 21709 of 2014
(Arising out of Order-in-Appeal No. 12 & 13/2014 (H-II) S.Tax dated 10.02.2014 passed by Commissioner of Customs, Central Excise & Service Tax (Appeals-II), Hyderabad) M/s Link Well Electronics .. APPELLANT Pvt Ltd., Link Well House, 2-3-76, 1st Floor, Tawaipura, Tarbund, Secunderabad, Hyderabad, Telangana - 500 009.
2 Appeal No. ST/3252/2012,
21708 & 21709/2014
VERSUS
Commissioner of Central Tax .. RESPONDENT
Medchal - GST
Kendriya Shulk Bhavan,
L.B Stadium Road,
Basheerbagh, Hyderabad,
Telangana - 500 004.
APPEARANCE:
Shri B. Venu Gopal, Advocate for the Appellant. Shri M. Anukathir Surya, Authorized Representative for the Respondent. CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30449-30451/2025 Date of Hearing: 04.07.2025 Date of Decision:31.10.2025 [ORDER PER: A.K. JYOTISHI] M/s Link Well Electronics Pvt Ltd., (hereinafter referred to as appellant) are in appeal against the Order-in-Original No. 12/2012-Adjn(ST)(Commr.) dated 17.07.2012 in respect of Service Tax under the category of "Business Auxiliary Services" (BAS) and "Erection, Commissioning or Installation Services" (ECIS) for the period 2005 March to 2010 and also against Order- in-Appeal No. 12 & 13/2014 (H-II) S.Tax dated 10.02.2014 covering period from April 2010 to March 2011 and April 2011 to March 2012 on the same issue.
2. The issue, in brief, is that M/s Link Well Electronics Pvt Ltd., were having agreement with certain companies like M/s Ricoh India Ltd., and M/s Motorola India Pvt Ltd, engaged in selling and marketing of Photocopiers and communication equipments respectively. Department, on scrutinising of all these documents, felt that the appellants were being paid different types of Commission for various responsibilities assigned to the appellant including procurement of order, collection of payment of from customer etc. Therefore, it was felt by the Department that they were acting on behalf of these 3 Appeal No. ST/3252/2012, 21708 & 21709/2014 companies and they were acting as agent resulting in promotion of business of their client and therefore these services were rightly classifiable under BAS. Similarly, the Department also noticed certain expenditure in the Balance Sheet of the appellant under the category of "Installation Expenditure", which was felt to be an expenditure incurred for the service of ECIS and therefore, holding that the same to be an expenditure in relation to ECIS. Though the appellant cleared those expenses towards travel and stay of their personnel, the Department disputed that these expenditures were in the nature of travel and stay of the Executive of the appellant, which they cleared to be done as a practice of their accounting practice, holding that they were receiving installation expenditure as reimbursement from M/s Motorola India Pvt Ltd., M/s Ricoh India Ltd., and others. However, as they failed to bifurcate the amounts with regard to installation and for other expenses, the CA certificate submitted by the appellant was discarded as there was no such bifurcation and therefore the Adjudicating Authority did not accept that installation expenditure was not in relation to Installation Service. Accordingly, the payment for the larger period was confirmed along with penalty, and subsequent periodical demands were also confirmed. On appeal, the Commissioner (Appeals) upheld the said demands against which the appellants have come in appeal.
3. Since the issues involved in the main impugned order dated 17.07.2012 and subsequent periodical SCNs confirmed and later on upheld by the Commissioner (Appeals), are having common issues, therefore, we propose to take up all these matters together.
4. Learned Advocate for the appellant is mainly contesting that as far as the demand under the category of BAS is concerned, they are not disputing 4 Appeal No. ST/3252/2012, 21708 & 21709/2014 the same on merit. However, they are contesting the imposition of penalty on the grounds that no Service Tax amount was charged or collected from the principals. Moreover, while computing the demand of Rs. 26,20,886/- on sales commission amount of Rs. 2,55,25,784/-, the Department has not given them the benefit of "Cum tax value" in terms of Section 67(2) of Finance Act, 1994. In this regard they have relied on the judgments, as under:
a) MGF Event Management Vs Commissioner of Central Excise, Delhi [2020 (37) GSTL 338 (Tri-Del)]
b) Cairn Energy India Pvt Ltd., Vs Commr of Central Excise & Customs, Visakhapatnam-II [2019 (27) GSTL 363 (Tri-Hyd)]
5. In so far as the demand of Rs. 68,10,616/- under ECIS, his main submission is that this is based on expenditure debited in Profit & Loss Account as their accounting practice and this is clearly against the provision of charging under Section 66 of Finance Act, 1994 as there is clear explanation as to how the amount has to be considered as value for the purpose of computing Service Tax under the category of ECIS. He further submits that this expenditure were in the nature of travel, stay etc., which were accounted for under the heading of "Installation Expenditure" and the fact that their Managing Director Mr. S. Harsha Vardhan Reddy in his statement dated 04.10.2010 had categorically denied that they had not received any reimbursement of installation expenditure in this regard by them further supports their submission. He is also contesting the imposition of penalty under Section 78 on the grounds that non-payment of Service Tax on sales commission was under bonafide mistake, whereas, under ECIS the same was not leviable to Service Tax at all. Therefore, there was a reasonable cause for non-payment of tax and therefore, they deserve the 5 Appeal No. ST/3252/2012, 21708 & 21709/2014 waiver of penalty in terms of Section 80 of Finance Act as existed during material time. They are relying on the judgment of Hon'ble High Court of Karnataka in the case of Commissioner of Service Tax, Bangalore Vs Motor World [2012 (27) STR 225 (Kar)].
6. Learned AR on the other hand reiterates the findings of the Adjudicating Authority and Commissioner (Appeals).
7. Heard both the sides and perused the records.
8. In so far as the issue of demand of Service Tax under the category BAS is concerned, we find that the appellants are not contesting the demand on merit and therefore, demand to that extent upheld by the Adjudicating Authority as well as by the Commissioner (Appeals) would stand along with applicable interest. In so far as the issue of allowing the benefit under Section 80 is concerned, we find that in the facts of the case, the Adjudicating Authority has clearly brought out the reason why Section 80 could not be applied in the facts of the case. He has relied on various judgements including the following:
i) CCE, Kolkata-I Vs Gurdian Leisure Planners Pvt Ltd., [2007 (6) STR 32 (Tri-Kolkata)]
ii) Trans (India) Shipping Pvt Ltd., Vs CCE, Chennai-I [2005 (188) ELT 445 (Tri-Chennai)
iii) Spic & Span Security & Allied Services (I) Pvt Ltd., Vs CCE, New Delhi [2006 (1) STR 320 (Tri-Del)]
9. We also find that in these cases, reliance placed on Collector Vs Chemphar Drugs [1998 (40) ELT 276 (SC)] was considered not relevant as in this case, the appellant had neither filed the requisite ST-3 returns nor disclosed to the Department about the facts of having received taxable 6 Appeal No. ST/3252/2012, 21708 & 21709/2014 income. Moreover, they never approached the Department to seek any clarification. If they had any bonafide doubt nor they have been able to adduce any conflicting judgements, wherein, under similar facts, it was held by the Tribunal or Court that no Service Tax is leviable on the commission received by commission agent. Thus, the plea of bonafide belief would not sustain in the given factual matrix and we find that the ingredients for invoking Section 78 are present in the facts of the case and therefore penalty under Section 78 would also sustain.
10. In so far as the issue of demand of service tax on ECIS, we find that Department has relied on certain expenditure reflected in their Balance Sheet and they have no other evidence to support that these expenses were in relation to the installation activity. There is nothing on record to support that the appellant had received any reimbursable expenses for installation. The Adjudicating Authority has, however, held that these installation expenditure were being reflected on debit side of the Balance Sheet and no schedule entry was provided in the Balance Sheet. However, in terms of agreement with M/s Motorola and M/s Ricoh, there was a provision for reimbursement of the installation expenditure and therefore, the Department held that in view of the nature of services provided by the assesse, the expenditure shown in the Balance Sheet for installation were reimbursable expenditure and therefore includable in the value of the taxable service provided. In other words, the Department has mainly relied on the fact that they were getting certain reimbursable expenditure towards installation services, which were required to be included in the value of the installation service, which in turn was leviable to Service Tax. We find that during the relevant period, the provision for including any reimbursable expenses was in terms of Rule 5 of Service Tax Valuation Rules, 2005. However, the said 7 Appeal No. ST/3252/2012, 21708 & 21709/2014 rule was subsequently declared null and void in the case of UOI Vs Intercontinental Consultants & Technocrats Pvt Ltd., [2018 (190) GSTL 401 (SC). Further, there is no detailed discussion nor any evidence to suggest as to whether this was in relation to any activity associated with installation and commissioning or otherwise. Therefore, in view of the same, the demand on the reimbursable expenditure would not sustain and therefore is liable to be set aside.
11. To sum up:
(a) Demand under category of BAS will sustain along with interest and imposition of penalty under Section 78.
(b) Demand under Erection Commission, Installation Service will not sustain and therefore, penalty, if any, is also liable to be set aside.
12. Appeals allowed partly.
(Pronounced in open court on __31.10.2025____) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) jaya