2015 (2) TMI 660 - AT - Service Tax

Security Agency Services - Manpower Recruitment or Supply Agency - Interest u/s 75 - Penalty u/s 76, 77 & 78 - Appellant are Cooperative Society registered under Rajasthan Societies Act for welfare of ex-servicemen by providing employment to them - during the period of dispute they were providing the services of security agency taxable under Section 65 (105) (w) readwith Section 65 (94) of the Finance Act, 1994 and the service of manpower or recruitment of supply service under Section 65 (105) (k) readwith Section 65 (68) of the Finance Act, 1994 - appellant's contention is that various Cooperative Societies registered under the Cooperative Societies Act of the respective States for welfare of ex-servicemen by providing employment to them are not commercial concern and hence during period prior to 01/05/06 their activity would not attract service tax - Held that - During the entire period of dispute including the period prior to 01/05/06, the activity of the appellant was taxable under Section 65 (105) (k) readwith Section 65 (68) and Section 65 (105) (w) readwith Section 65 (94) of the Finance Act, 1994. - Following decision of Punjab Ex-Service Corporation vs. Union of India 2010 (9) TMI 871 - PUNJAB & HARYANA HIGH COURT Since there was no malafide or intention to evade on the part of the appellant, it has to be held that non-payment of service tax was due to bonafide reason and, hence, invoking Section 80 of the Finance Act, 1994 penalty under Section 76, 77 and 78 have to be waived. - Decided partly in favour of assessee

Issues:
1. Taxability of services provided by a cooperative society for ex-servicemen under Security Agency and Manpower Recruitment categories.
2. Applicability of service tax and penalties for non-payment.
3. Interpretation of the term "commercial concern" in relation to tax liability.
4. Consideration of limitation period for demand of service tax.
5. Assessment of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Taxability of services provided by a cooperative society for ex-servicemen under Security Agency and Manpower Recruitment categories:
The case involved a cooperative society registered under the Rajasthan Cooperative Societies Act, providing security services and manpower recruitment services to clients. The Department contended that these services were taxable under relevant sections of the Finance Act, 1994. The appellant argued that as a cooperative society for ex-servicemen, they were not a commercial concern and thus not liable for service tax. The Tribunal noted conflicting judgments but held that the appellant's services were taxable under the relevant sections.

Issue 2: Applicability of service tax and penalties for non-payment:
The Commissioner confirmed service tax demands against the appellant for the period in question, along with interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant contended that due to a series of Tribunal judgments in their favor, they believed their services were not taxable, and thus, the longer limitation period for demand of service tax should not apply. The Tribunal agreed with the appellant's argument and held that the service tax demand for the earlier period was time-barred.

Issue 3: Interpretation of the term "commercial concern" in relation to tax liability:
The appellant argued that as a cooperative society for ex-servicemen, they did not fall under the definition of a commercial concern, thereby exempting them from service tax liability. While various Tribunal judgments supported this argument, the Punjab & Haryana High Court held a contrary view. The Tribunal, considering the binding nature of the High Court judgment, ruled that the appellant's activities were taxable under the Finance Act, 1994.

Issue 4: Consideration of limitation period for demand of service tax:
The Tribunal held that due to the conflicting judgments regarding the taxability of services provided by cooperative societies for ex-servicemen, the appellant's non-payment of service tax was based on a bonafide belief. Therefore, the longer limitation period for demand of service tax was not applicable, and the demand for the earlier period was considered time-barred.

Issue 5: Assessment of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The Tribunal, considering the bonafide belief of the appellant and the absence of malafide intent, waived the penalties under Sections 76, 77, and 78. Citing relevant judgments, the Tribunal held that non-payment of service tax was due to bonafide reasons, and thus, the penalties should be waived under Section 80 of the Finance Act, 1994.

In conclusion, the appeal was partly allowed based on the above considerations, and the Tribunal provided a detailed analysis of the taxability of services, interpretation of relevant legal terms, and the application of penalties in this case.

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