2008 (2) TMI 50 - AT - Service Tax

In terms of the law existing at the relevant period(16.10.98 to 31.01.04), in order to demand service tax on a security agency, it should have been a commercial concern - but appellant is a co-operative society, registered for the welfare of the Ex-servicemen - from this, it follows that the appellant is not a commercial concern moreover assessee had bonafide belief about their liability so larger period cannot be invoked to raise demand demand and penalty are set aside

Summary

Issues:
1. Service tax liability for the period from 16.10.1998 to 31.01.2004.
2. Imposition of penalties under various Sections.
3. Applicability of the longer period in the show cause notice.
4. Bona fide doubt regarding liabilities.
5. Nature of the appellant as a cooperative society.
6. Sustainability of the demand for service tax.

Analysis:
The appeal was filed against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) Belgaum regarding service tax liability for the period from 16.10.1998 to 31.01.2004. The Adjudicating Authority confirmed a demand of Rs.18,07,197/- with penalties under different Sections. The first Appellate Authority upheld the duty demand but set aside the penalties due to the appellant's bona fide doubt regarding their liabilities. The Tribunal noted that the longer period invoked in the show cause notice was not sustainable as the appellants had a genuine doubt. Additionally, the appellant, being a cooperative society for the welfare of Ex-servicemen, was not a commercial concern as required by the law at the relevant period. Despite this, the Commissioner confirmed the demand, leading to the conclusion that the demand was not sustainable on merit. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

The Tribunal observed that the show cause notice invoking the longer period was not justified due to the appellant's bona fide doubt regarding their liabilities. The Appellate Authority correctly set aside the penalties considering the circumstances of the case. Moreover, the nature of the appellant as a cooperative society registered under the Karnataka Co-operative Society Act was crucial. As a cooperative society for the welfare of Ex-servicemen, the appellant did not qualify as a commercial concern required for demanding service tax on a security agency. This discrepancy highlighted the lack of merit in the impugned order confirming the demand. Therefore, the Tribunal concluded that the demand for service tax was unsustainable based on both procedural and substantive grounds.

In conclusion, the Tribunal found that the demand for service tax and penalties was not sustainable due to the appellant's genuine doubt regarding their liabilities and the nature of the appellant as a cooperative society, not meeting the criteria of a commercial concern for service tax imposition. The impugned order was set aside, and the appeal was allowed with consequential relief, emphasizing the importance of adhering to legal requirements and considering the specific nature of the appellant in tax liability determinations.