2017 (3) TMI 1293 - AT - Service Tax

Security agency service provided by the society of ex-serviceman - commercial concern or not - tax entry section 65(105)(w) - Held that - the services rendered are squarely covered by the tax entry and we see no merits in the pleas of the appellant in this regard. The lower authority examined the issue in detail and we find no ground in the present appeal to interfere with the findings. Similarly the appellants are covered for tax liability for the whole period of demand is clear from their legal status and financial accounts to the effect that they are infact involved in profitable commercial activity. It is clear from the bylaws of the society which clearly stipulates about net profit - there is no justification to hold the appellant as anything other than commercial entity. It is clear that the appellants did not provide the required details and come forward with full facts during the course of audit during subsequent inquiry conducted by the department. Even at the time of filing regular ST 3 return the appellant did not show the full gross amount received from the clients for providing taxable service. Considering these facts as recorded in the impugned order the demand is sustainable for the full period. Penalties - Held that - there is reasonable cause for non payment of Service tax during the material time. Considering the background of operation of assessee and also circumstances pleaded by the appellant in appeal we find it fit and proper to waive the penalties imposed on the appellant invoking the provisions of section 80 as available during material time. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Appeal against order of Commissioner of Central Excise for non-payment of service tax under 'security agency' category; Appellant's contention of not being a commercial concern; Demand of extended period; Valuation for service tax purpose; Penalties imposed under various sections.

Analysis:
The judgment pertains to an appeal against the order of the Commissioner of Central Excise concerning the non-payment of service tax by the appellants, who are engaged in providing services categorized under 'security agency.' The period in question spans from November 2004 to September 2009, with a confirmed service tax liability of ?64,80,971 imposed by the original authority, along with penalties under sections 76, 77, and 78 of the Finance Act, 1994.

The appellant argued that they are registered as a society governed by government regulations, mainly involved in resettlement of ex-servicemen and welfare activities, not engaging in commercial activities. They contended that even after a 2006 tax entry amendment, no service tax liability should arise as they do not provide taxable services. The appellant also highlighted the financial difficulties faced due to non-reimbursement of Service Tax by government entities.

The Department's representative countered by stating that the appellant's bylaws indicated commercial operation and profit allocation regulations, emphasizing the gross amount received should be the basis for service tax valuation. The Department further argued that the extended period demand was justified due to the appellant's failure to provide essential documents despite repeated requests.

After hearing both parties, the Tribunal upheld the appellant's service tax liability under the 'security agency' category, rejecting their arguments. The Tribunal found merit in the Department's stance that the appellant operated as a commercial entity based on their bylaws and financial activities, emphasizing the gross amount received as the valuation basis for service tax.

Regarding penalties imposed for the extended period demand, the Tribunal acknowledged the appellant's difficulty in recovering tax amounts from government entities and waived the penalties under section 80 of the Finance Act, 1994, considering the circumstances and difficulties faced by the appellant.

In conclusion, the Tribunal upheld the service tax liability of the appellant but set aside the penalties imposed, ruling in favor of the appellant on that aspect. The appeal was disposed of accordingly.