2012 (7) TMI 776 - AT - Service Tax

Demand of service tax - Society of ex-servicemen - service of Security Agency - definition of Security Agency was changed w.e.f. 18.4.2006 referring any person engaged in the business of rendering services instead of commercial concern . With effect from 18.4.06, they have started paying service tax Held that - Society of ex-servicemen engaged in providing security services so as to provide reemployment of ex-servicemen, cannot be held to be a commercial concern. Security agency services rendered by commercial concern was liable to pay service tax and the appellant not being a commercial concern, cannot be held to be liable to pay tax

Summary

Issues:
1. Liability of service tax on Security Agency services provided by a cooperative society.
2. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Liability of service tax on Security Agency services provided by a cooperative society

The case involved a cooperative society registered under the Co-operative Societies Act, 1965, engaged in providing security personnel services to various organizations. The society was approved by Sainik Kalyan Vibhag, Government of Rajasthan, to provide re-employment to ex-servicemen. The society collected minimum wages plus a 5% service charge as per guidelines. A show-cause notice was issued proposing service tax demand on Security Agency Services. The society contended that as they were not a commercial concern providing security services, they should not be liable to pay service tax. The definition of Security Agency was amended with effect from 18.4.2006, including "any person" instead of 'commercial concern'. The society started paying service tax from this date. The Tribunal referred to a previous case involving a society of ex-servicemen providing security services and held that such societies cannot be considered commercial concerns liable for service tax. As the society in the present case was not a commercial concern, they were not liable to pay service tax during the relevant period. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

Issue 2: Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994

The Tribunal confirmed a service tax demand against the appellants for providing Security Agency services and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, since the Tribunal found that the appellants were not liable to pay service tax as they were not a commercial concern engaged in providing security services, the penalties imposed under the said sections were also set aside. The Tribunal's decision to allow the appeal with consequential relief to the appellant encompassed the cancellation of all penalties imposed under the Finance Act, 1994.