2014 (12) TMI 748 - AT - Service Tax

Penalty u/s 76, 77 & 78 - Intention to evade tax - bonafide belief - Held that - Only during the search on 17.01.2006 it was discovered that the appellants had not paid the impugned service tax which pertains to the period 01.04.2002 to 31.03.2003. In his statement which was recorded several days after the search, the proprietor Shri V.P. Singh did not claim to be ignorant about service tax and indeed admitted that the appellants service tax liability was pending. It is totally untenable to claim that proprietary organisation is not a concern. They were clearly engaged in commercial activity. So the appellants were clearly a commercial concern. It is seen that M/s. Vasudha Security Pvt. Ltd. had taken registration in the year 2005 which clearly shows that they were aware about the service tax leviability on security services way before the search operation. Thus, it was not a case of ignorance on the part of the appellants but a deliberate act on their part to evade service tax. - Decided against assessee.

Summary

Issues:
- Appeal against Order-in-Appeal sustaining Order-in-Original confirming Service Tax demand, interest, and penalties
- Applicability of Service Tax on security agency services
- Claim of being a proprietary firm not liable to service tax
- Allegation of suppression and deliberate evasion of service tax

Analysis:
The appeal was filed against Order-in-Appeal upholding Order-in-Original confirming Service Tax demand, interest, and penalties. The appellants, a security organization, were found providing security agency services during a search. It was revealed that the proprietor was associated with multiple security firms and admitted to pending service tax liabilities. The appellants argued they were not liable to service tax as a proprietary firm and claimed ignorance, but evidence showed awareness of service tax liability. The Tribunal noted the commercial nature of the appellants' activities and their deliberate evasion of service tax. Despite citing judgments requiring positive evidence for suppression, the Tribunal found the appellants fully aware of their service tax liabilities, as evidenced by registration of another security agency. Consequently, the appeal was rejected, emphasizing the lack of merit in the appellant's arguments.

This judgment highlights the importance of compliance with tax obligations, especially in commercial activities like security services. It underscores that mere ignorance or claiming proprietary status does not absolve entities from fulfilling their tax liabilities. The Tribunal's decision was based on the clear evidence of awareness and deliberate evasion by the appellants, leading to the rejection of their appeal.