2017 (12) TMI 774 - AT - Service Tax

Levy of service tax - security agency service - appellant are mainly involved in resettlement activities related to welfare of ex-servicement - It is the claim of the appellant that since their organization is a charitable society, the same does not have the character of a commercial concern and hence, they are not liable to pay service tax - Held that - services provided in relation to the security of any property or person becomes a taxable service under law - a similar issue came up before the Hon ble Punjab and Haryana High Court in the case of Punjab Ex-servicemen Corporation 2010 (9) TMI 871 - PUNJAB & HARYANA HIGH COURT , where it was held that As per definition of security agency under Section 65(94) service provider should be engaged in the business rendering specified service. There is no warrant for reading therein requirement of profit motive - the service rendered by appellant is liable to tax - appeal dismissed - decided against appellant.

Summary

Issues:
- Whether a registered society providing security agency services is liable to pay service tax?
- Whether the appellant's organization qualifies as a commercial concern for the purpose of service tax liability?
- Whether penalties imposed on the appellant for non-payment of service tax are justified?

Analysis:
1. The appellant, a registered society under the Societies Act of 1955, provided security agency services to various organizations, including government departments, from 16.10.1998 to 31.8.2002. The dispute arose when the revenue authorities demanded service tax from the appellant for the services rendered. The appellant contended that as a charitable society, they were not a commercial concern and thus not liable to pay service tax. However, the authorities upheld the demand for service tax, leading to the filing of appeals by the appellant against the orders-in-appeal.

2. The main argument presented by the appellant was that being a society governed by Government Rules and involved in welfare activities for ex-servicemen, they were not engaged in commercial activities and hence should not be considered a commercial concern. However, citing relevant legal precedents, the Tribunal held that the word "business" in the definition of security agency does not necessarily imply a profit motive. The Tribunal referred to judgments where entities engaged in activities for support or pleasure were still considered commercial concerns for tax purposes. Consequently, the Tribunal concluded that the appellant's society did constitute a commercial concern for the purpose of service tax liability.

3. The Tribunal examined the valuation of taxable services provided by the appellant in relation to security agency services. Referring to the definitions under the Finance Act, the Tribunal noted that services related to the security of property or persons were deemed taxable services. The gross amount charged by the agency, including payments to security personnel, constituted the value of taxable services. Additionally, the Tribunal reviewed penalties imposed on the appellant for non-payment of service tax. While upholding the service tax liability of the appellant, the Tribunal decided to waive the penalties considering the appellant's difficulties in realizing tax amounts from government clients and the absence of evidence showing billing or receipt of tax amounts during the material time.

4. Ultimately, the Tribunal dismissed the appeals filed by the appellant, upholding the impugned orders that demanded service tax payment. The penalties imposed on the appellant were set aside based on the circumstances and provisions of Section 80. The judgment highlighted the legal position that entities engaged in activities falling within the scope of taxable services are liable to pay service tax, irrespective of their organizational structure or profit motive.