2016 (9) TMI 895 - AT - Service Tax

Security Agency services - period involved is 2001-2002 to 9/2005 - Demand alongwith interest and penalties - Held that - from the submissions made before us and the documents adverted to by the appellant it is plain that the appellant did indeed provide services other than security services. It also emerges that the other services provided by the appellant were definitely not subject to service tax for major portion of the period under dispute. This is evidenced by the clarifications given by the CBEC in the FAQs issued by them in 2003. It is further seen that out of the other services provided by appellant, manpower supply services was made taxable from 16.06.2005. Hence at the most only for the period from 16.06.2005 on ward, till September 2005 could there arise service tax liability on the said services and also for any other services provided by them which were not taxable earlier but were later brought into the net with effect from 16.06.2005. Regarding the inclusion of salaries paid by the appellant in taxable value it is seen that a number of Tribunal decisions have clearly held that staff salary and infrastructure expenses are required to be abated. Therefore, the value of services other than Security Agency Services cannot be included under the taxable value of the latter. Staff salary and infrastructure expenses cannot be included in the taxable value for determination of service tax liability and the services other than security services, provided by appellant during the period covered by SCN viz; 2001-2002 to 2005-2006 (upto 9/2005), eg; Manpower supply service will be subject to service tax liability only w.e.f. 16.05.2005. To enable reworking/ recomputation of the service tax liability that has to be discharged by the appellant, the matter requires to be remanded to the adjudicating authority for denovo adjudication - Appeal allowed by way of remand

Summary

Issues involved:
1. Whether the appellant was liable to pay service tax on the services provided.
2. Whether the appellant's income was solely from security services.
3. Whether salaries and infrastructure expenses should be included in the taxable value.
4. Whether the matter requires remand for reworking the service tax liability.

Analysis:

1. The appellant, a proprietorship firm, provided various services, including security agency services. The Department alleged that the appellant did not discharge service tax on the full amount received for security services. The appellant contended that they provided multiple services, such as maintenance work and parking attendants, not falling under security services. The appellant relied on clarifications stating that services other than security services are not liable for service tax. The Tribunal found that the appellant indeed provided services other than security services, which were not taxable for a significant period. Therefore, the demand for service tax on all services was not justified.

2. The Department argued that the appellant's income was declared as solely from security services in Income Tax returns, justifying the service tax demand. However, the Tribunal observed that the appellant provided various services beyond security services, which were not taxable. The Tribunal referred to clarifications exempting certain services from service tax and concluded that only specific services were liable for service tax from a certain date onwards.

3. The appellant contested the inclusion of salaries and infrastructure expenses in the taxable value. The Tribunal referred to previous Tribunal decisions holding that such expenses should be abated. Relying on precedents, the Tribunal ruled that salaries and infrastructure expenses cannot be included in the taxable value for determining service tax liability, aligning with established legal principles.

4. Considering the above findings, the Tribunal decided to remand the matter to the adjudicating authority for a fresh adjudication to rework the service tax liability based on the Tribunal's conclusions. The Tribunal allowed the appeal on specific terms, emphasizing the need for a reassessment of the service tax liability in light of the issues discussed and the legal principles applied during the proceedings.

This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, legal principles applied, and the Tribunal's decision, ensuring a detailed understanding of the case.