2007 (7) TMI 31 - AT - Service Tax

Demand(service tax) - Department contended that appellant is liable to pay service tax under Security Agency service but as per their service is exempted and not liable to pay service tax - Matter remanded for reconsideration

Summary

Issues:
1. Whether the appellants rendered security services and failed to pay Service tax.
2. Whether the appellants' claim for exemption under Notification No. 56/98-ST can be considered.
3. Whether the appellants can raise the claim for exemption before the Tribunal for the first time.

Analysis:

1. The authorities observed that the appellants had not paid Service tax for security services rendered during 2000-01 to 2004-05. The original authority demanded Service tax, Education Cess, interest, and imposed penalties. The appellants argued that they inflated revenue in income-tax returns to secure a bank loan, serving State Government entities. The lower authorities upheld the demand and penalties, rejecting the appellants' contentions.

2. The appellants claimed that the security services provided to State Government entities were exempt under Notification No. 56/98-ST. They stated that income-tax returns included revenue from various sources. They contended ignorance of statutory provisions before lower authorities affected their case presentation.

3. The appellants sought to claim exemption benefits before the Tribunal, asserting it as a legal question. The department opposed, arguing against allowing new grounds at this stage. After reviewing submissions, it was found that verification of services rendered and amounts collected should have been prioritized over relying solely on income-tax records. The matter was remanded to the original authority for examining the exemption claim under Notification No. 56/98-ST. The appellants were directed to provide acceptable evidence regarding falsified tax returns and exemption eligibility, with the assurance of a fair opportunity to present their case.

This detailed analysis of the judgment highlights the issues of Service tax payment, exemption claim under a specific notification, and the admissibility of new grounds before the Tribunal, providing a comprehensive overview of the legal proceedings and decisions made by the Appellate Tribunal CESTAT, Chennai.