2009 (1) TMI 186 - AT - Service Tax

Guarding and manning of the exchanges/offices and operating the generators in case of power failure revenue considered that appellants are engaged in security services to BSNL Clause 10 of the agreement indicates that the appellant will be liable to compensate in full the losses to the BSNL on account of any theft/burglary tribunal upheld that the activity is falling within the category of security agency service liable to tax demand and interest upheld penalty set aside however matter remanded to recalculate the demand after extending the cum-tax benefit.

Summary

Issues:
1. Tax liability on security services provided to BSNL.
2. Reduction of penalty imposed under Section 75 of the Act.

Analysis:
1. The case involved a dispute regarding the tax liability on security services provided by the appellants to BSNL. The Central Excise Officers detected that the appellants were providing security services during an audit of service tax records of BSNL. The original authority confirmed the demand of tax under the category of "security services" and imposed a penalty, which was later reduced by the Commissioner (Appeals) to Rs. 40,000/- and Rs. 500/- under Section 75 of the Act.

2. The appellant argued that the demand was raised based on an audit objection and that they had requested BSNL to provide information about the services of helper and gunman, contending that they had rendered services other than security services at the premises of BSNL. However, the agreement between the parties indicated that the appellants provided guarding, manning of exchange/office, and operating generators in case of power failure. The agreement also specified compensation for losses due to theft/burglary, and it was observed that the appellants provided helper and gunman to BSNL without evidence that the security men were used for other purposes.

3. The Tribunal found that the appellants did provide security services to BSNL, a Public Sector Undertaking, as per the agreement and the evidence presented. While the Commissioner (Appeals) noted no mala fide intent on the part of the appellant, the Tribunal upheld the demand of tax along with interest but set aside the penalties imposed. The original authority was directed to re-determine the tax liability by extending the cum-tax benefit. Ultimately, the appeal was disposed of with these terms.

This judgment highlights the importance of contractual agreements, the nature of services provided, and the applicability of tax liabilities in cases involving the provision of specific services, such as security services, to government entities like BSNL.