2017 (11) TMI 1270 - AT - Service Tax

Security agency service - Non-payment of service tax - demand of duty with penalties - Held that - The appellants did not pay the service tax at least for two years during the material time neither they filed any returns during this time. The reasons for the same are not at all tenable. Admittedly, the business continued and the appellants earned income. They also collected service tax along with their charges. Their failure to deposit service tax especially when the same has been collected from the client, clearly brought out the deliberate intent of non-payment of service tax. Valuation of taxable service - Held that - identical issue decided in the case of Neelav Jaiswal & Brothers Versus CCE, Allahabad 2013 (8) TMI 147 - CESTAT NEW DELHI , where it was held that Section 67 of the Act dealing with valuation of taxable service for charging Service Tax specifies that where the provision of service is for a consideration in money, the taxable value would be the gross amount charged by the service provider for such service provided or to be provided by him. Pure agent service - reimbursement of expenses towards Uniform Allowance, Bonus, PF, OT allowance, ESIC, Insurance, etc - includibility - Held that - We find no merit in such claim as clearly brought out in the impugned order. The appellants could not produce any contractual agreement with the clients and details of bills raised to indicate as per pre-arrangement that there are reimbursable expenditure Extended period of limitation - penalty - Held that - the non-payment of service tax, even after collection of the same from the client, non-filing of returns, when the appellant is in this business for long time, is not supporting the claim of the appellant against imposition of penalty or demand for extended period - extended period and penalty rightly invoked. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Violation of principles of natural justice in passing the impugned order.
2. Liability to pay service tax on reimbursement of expenses.
3. Invoking extended period of limitation for demand.
4. Non-payment of service tax due to health issues and financial problems.
5. Allegations of malafide intent in non-payment of service tax.
6. Contesting the valuation of taxable service for payment of service tax.
7. Claiming exclusion of certain consideration as reimbursable expenditure.
8. Allegations of the impugned order being passed in violation of principles of natural justice.
9. Lack of opportunity to defend the case.

Analysis:

1. The appellant raised concerns about the violation of principles of natural justice in the impugned order, stating that relied-upon documents were not provided during the personal hearing. They argued that this lack of access hindered their ability to file a defense reply, thus breaching natural justice. However, the original authority proceeded with the case, leading to the imposition of penalties under various sections of the Finance Act, 1994.

2. The appellant contended that they should not be liable to pay service tax on reimbursement of expenses like Uniform Allowance, Bonus, PF, OT allowance, etc., asserting that service tax should only apply to the service charges retained by them. They referenced previous cases to support their stance on this issue.

3. The appellant challenged the invocation of an extended period of limitation for demand, arguing that the question of valuation of security agency service was a subject of dispute in various judicial fora. They claimed that in interpretation-based disputes, no demand for an extended period should be issued.

4. The appellant cited health issues and financial problems, including the serious illness and subsequent demise of a key company director, as reasons for their failure to pay service tax or file returns during a specific period. They also highlighted that employees did not follow proper procedures regarding tax payments and returns, denying any malafide intent.

5. The appellant's financial hardship claim was contested by the respondent, who argued that the business was operational, and revenue was generated during the material period. The respondent emphasized that collecting service tax from clients but not remitting it to the government indicated a deliberate intent to avoid payment.

6. The valuation of taxable service for service tax payment was a point of contention. The appellant referenced a decision by the Hon’ble Delhi High Court, while the Tribunal analyzed the relevant sections and definitions to determine the gross amount charged by the appellant for the taxable service provided.

7. The appellant's claim of acting as a pure agent or excluding certain consideration as reimbursable expenditure was dismissed. The Tribunal found no merit in this claim, emphasizing the lack of contractual agreements or evidence to support such assertions.

8. The appellant reiterated allegations of the impugned order being passed in violation of principles of natural justice, stating that relied-upon documents were not provided. However, the Tribunal noted that relevant details were available to the appellants, and the Director had admitted to the total service tax liability.

9. The appellant's argument of lack of opportunity to defend the case was refuted, as a personal hearing had been conducted, and the appellant failed to submit written statements despite requesting time to do so. The Tribunal found no reason to interfere with the impugned order, considering the non-payment of service tax despite collection and lack of convincing reasons for non-compliance.