2006 (7) TMI 15 - AT - Service Tax

Service Tax Security Agency service Service tax to be paid on gross amount received from the client for the services rendered in connection with security and not on the service charge Appellant paid short payment due to bona fide belief not accepted Penalty

Summary

Issues: Service tax demands and imposition of penalties challenged by security service providers.

Analysis:
1. Service Tax Demands: The appellants, security service providers, were alleged to have underpaid service tax from October 1998 to September 1999 by not considering the "gross amount charged" for their services, as required by law. The appellants argued that they separately charged for various components like wages, PF, ESI, and service charge, and therefore, only the service charge should be considered for valuation. However, the tribunal held that the definition of taxable service value clearly states that the "gross amount charged" should be the basis, including all components charged to the client. The tribunal rejected the appellant's contention and ordered the revenue to recompute the tax amounts based on total receipts inclusive of service tax.

2. Penalties Imposed: The appellants contested the penalties imposed under Section 80 of the Finance Act, 1994, arguing that the underpayment was a bona fide error and thus should not attract penalties. However, the tribunal found that the appellants' belief that only the service charge should be considered for valuation was not reasonable, given the legal provisions and trade notice provided. Therefore, the tribunal upheld the penalties but reduced them to Rs. 100 per day, as per a previous tribunal ruling. The appellants were directed to pay the revised penalty amount, not exceeding the differential tax demand.

3. Conclusion: The tribunal ruled in favor of the revenue authority regarding service tax demands, ordering the re-computation of tax amounts based on total receipts inclusive of service tax. Additionally, the penalties imposed on the appellants were upheld but reduced to Rs. 100 per day, with a cap not exceeding the differential tax demand. Both appeals were decided accordingly, with the tribunal providing a detailed analysis and legal reasoning for its decision.