2018 (7) TMI 1675 - AT - Service Tax

Taxability - Security Agency services - appellant are a society registered under the Society Registration Act, 1860 and also registered as Public Charitable Trust - whether the activities of appellant are Commercial in nature or not? - Held that - Reliance was placed in the case of PUNJAB EX-SERVICEMEN CORPORATION VERSUS UNION OF INDIA 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 - taxability of service upheld. Time Limitation - penalties - Held that - Considering the nature of organization which is charitable and considering the fact that a number of Tribunal decisions have expressed a similar view, there is no justification in invoking extended period of limitation as the appellant could have harbored a bonafide view - extended period of limitation and penalty set aside. Appeal allowed in part.

Issues:
1. Taxability of services provided by a society registered under the Society Registration Act, 1860 and as a Public Charitable Trust.
2. Interpretation of the term "commercial concern" in relation to service tax liability.
3. Applicability of profit motive in determining tax liability.
4. Impact of the 2004 amendment on the limitation law.
5. Imposition of penalties and extended period of limitation.

Analysis:

Issue 1: Taxability of services by a charitable society
The appeal was filed by a society providing security services against the demand of service tax. The society argued that being a charitable organization, they were not engaged in commercial activities and thus not liable for service tax. They highlighted their activities of providing employment opportunities and training for security services. The Revenue contended that the absence of profit motive does not exclude services from being considered commercial. The Tribunal examined the nature of the society's activities and concluded that they were engaged in the business of providing security services, which falls under the definition of a security agency. The Tribunal rejected the argument that charitable activities cannot be commercial in nature, emphasizing that the charging provision under Section 68 of the Act does not require a profit motive for service tax liability.

Issue 2: Interpretation of "commercial concern"
The definition of a security agency includes a commercial concern engaged in providing security services. The society argued that being a statutory corporation created to help ex-servicemen, they did not have a profit motive. The Tribunal clarified that the term "business" in the definition does not necessarily imply a profit motive. Citing legal precedents, the Tribunal explained that the term business in a taxing statute refers to an occupation or profession carried out with the objective of making a profit. The Tribunal emphasized that the word business in the definition of a security agency does not mandate a profit motive but requires services to be provided for consideration as a regular activity.

Issue 3: Profit motive in tax liability
The Tribunal further elaborated on the requirement of a profit motive in a taxing statute, emphasizing that the word business does not inherently imply a profit motive. Referring to legal judgments, the Tribunal clarified that the legislative intent determines whether a profit motive is essential in a specific taxing statute. The Tribunal highlighted that the definition of a security agency does not necessitate a profit motive but requires services to be provided for consideration as a regular activity.

Issue 4: Impact of the 2004 amendment on limitation law
The society raised a contention regarding the applicability of the 2004 amendment on the limitation law. The Tribunal clarified that while the limitation law in force at the time of the decision may apply, the cause of action remains unaffected by subsequent amendments. Citing legal precedent, the Tribunal explained that statutes of limitation are retrospective in enforcing causes of action accrued earlier but do not extinguish subsisting rights of action.

Issue 5: Imposition of penalties and limitation period
Regarding the imposition of penalties and the extended period of limitation, the Tribunal considered the charitable nature of the organization and the existence of Tribunal decisions supporting the society's interpretation. Consequently, the Tribunal set aside the imposition of penalties and the invocation of the extended limitation period, allowing the appeal in part.

In conclusion, the Tribunal dismissed the appeal concerning the taxability of services provided by the society but partially allowed the appeal concerning penalties and the limitation period. The decision was based on the interpretation of relevant legal provisions and precedents, emphasizing the distinction between charitable activities and commercial concerns in the context of service tax liability.

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