2008 (1) TMI 219 - AT - Service Tax

Appellant provide Security personnel is to various clients including official liquidator - valuation of security services assessee contended that the reimbursement on account of various factors cannot be charged to service tax - appellants don t have prima facie a strong case on merits - taking into account the fact that they had already deposited an amount of 2.6 lac & also that the official liquidator had deposited some amount appellants should deposit an amount of 7 lac penalty waived

Summary

Issues: Valuation of security services for service tax liability, applicability of Section 67 of the Finance Act, 1994, financial hardship, limitation period for verification, interpretation of Section 11A proviso, deposit amount for waiver of service tax and penalties.

In this judgment by the Appellate Tribunal CESTAT, New Delhi, the dispute revolves around the valuation of security services provided by the appellants and their service tax liability. The Hon'ble Allahabad High Court directed the official liquidator to pay service tax to the Government without the appellants' intervention, resulting in a liability of Rs. 14.7 lakhs. The appellant argued that as per Section 67 of the Finance Act, 1994, service tax should only be levied on the gross amount received for services rendered, excluding reimbursements for various factors. The appellant cited Tribunal decisions and Board's Circulars to support this contention, emphasizing that service tax should not be charged on reimbursements for other purposes.

The learned DR countered by stating that the case laws referred to by the appellant were not directly applicable to the present case. The DR highlighted specific decisions such as New Industrial Security Force v. CCE, Kanpur, Panther Detective Services v. CCE, Kanpur, and Punjab Ex-Servicemen Corpn. to support this argument. The appellant also raised the issue of financial hardship and argued on the limitation period, claiming that they had been filing returns since 1999 without any Departmental verification. The appellant believed in good faith that reimbursements for security personnel salaries were not subject to service tax, as they had not collected service tax from their clients and had paid the salary amounts to the personnel. The appellant cited the decision in Continental Foundation Jt. Venture v. CCE, Chandigarh to argue against the invocation of the extended period under Section 11A.

After careful consideration, the Tribunal acknowledged the depth of the issue regarding the valuation of security agency services based on previous Tribunal decisions. While the appellants did not prima facie have a strong case on merits, considering the amount already deposited and the partial deposit by the official liquidator, the Tribunal ordered the appellants to deposit an additional amount of Rs. Seven lakhs within eight weeks under Section 35F. Upon this deposit, the balance amount of service tax and penalties were waived until the appeal's disposal. The appellants were required to report compliance by a specified date.