2008 (9) TMI 207 - AT - Service Tax

Applicant is registered as cooperative society for the welfare of ex-serviceman and providing security services submission that services by security agencies are subject to tax only if the said security agency was a commercial concern submission of revenue is that appellant is running on profit as seen by their balance sheet so they should be considered as a profit making concern - Prima facie we find merit in the submission of appellant that the demand is hit by time bar stay granted

Summary

Issues:
1. Whether the cooperative society providing security services to the government is liable to pay service tax.
2. Whether the demand raised against the cooperative society is time-barred.
3. Whether pre-deposit of duty and penalty should be waived pending appeal.

Analysis:

Issue 1: Liability to pay service tax
The applicant, a cooperative society for ex-servicemen, engaged in providing security services to government offices, was served with a demand for service tax and penalty. The contention was that as a cooperative society, they should not be considered a commercial concern subject to service tax. The applicant argued that they started paying tax on commission upon clarification from the Rajasthan Government, believing wages and salaries were not taxable. The Tribunal noted the amendment in the definition of security agencies in 2006, removing the term "commercial concern." After considering submissions, the Tribunal found merit in the argument that the demand was time-barred and held in favor of waiving the pre-deposit of dues pending appeal.

Issue 2: Time-barred demand
The Tribunal acknowledged the applicant's argument that the demand for service tax was time-barred. The applicant contended that they started paying tax in line with the clarification received from the Rajasthan Government and had no disputes until the receipt of the CAG report. The Tribunal considered the timeline of events and the bona fide belief of the applicant in not being subject to service tax for wages and salaries. Consequently, the Tribunal held that the demand was hit by the time bar, supporting the waiver of pre-deposit of duty and penalty.

Issue 3: Waiver of pre-deposit pending appeal
Both sides presented their arguments regarding the pre-deposit of duty and penalty pending the appeal. The Department sought pre-deposit to safeguard revenue interests, highlighting the applicant's access to advice from a reputable CA firm and their profitable status as per the balance sheet. However, the Tribunal, after considering the submissions, found merit in the applicant's argument regarding the time-barred demand. Consequently, the Tribunal waived the pre-deposit of duty and penalty, staying the recovery until the appeal's disposal.

In conclusion, the Tribunal ruled in favor of the applicant, waiving the pre-deposit of dues pending appeal, based on the finding that the demand for service tax was time-barred and the applicant's genuine belief regarding the taxability of wages and salaries.