2024 (10) TMI 1130 - AT - Service Tax

Levy of service tax - security services availed from CISF under reverse charge mechanism basis - valuation of free housing facility provided by the appellant to the CISF personnel - Rule 2 (1) (d) (i) (E) of the Service Tax Rules of 1994 read with Notification No. 30/2012 -ST dated 20.06.2012 - HELD THAT - The issue of valuation of free housing facility provided by the appellant to the CISF personnel is no longer res integra as this Tribunal in the appellant s own case NTPC LTD VERSUS C.C.E. S.T. -SURAT-I 2024 (5) TMI 816 - CESTAT AHMEDABAD decided the issue in favour of the appellant - thus, it is seen that the demand raised by the Department is unsustainable and liable to be set aside. It is further observed that the appellant are not liable to pay service tax on the value of accommodation, vehicles for transportation, telephone facilities, etc. and it is found that as regard the issue penalty, the demand on merits is not sustainable, there is no question of imposition of penalty under Section 76. It is also observed that when the demand is not maintainable, there is no question of interest on the differential demand of service tax. Hence, the interest demand on the differential service tax liability is not maintainable. The impugned order is set aside - Appeal allowed.

Summary

Issues Involved:

1. Whether the security services received by the appellant from CISF were correctly valued under Section 67 of the Finance Act, 1994, for the purpose of discharging service tax liability on a reverse charge basis.
2. Whether the value of free facilities provided by the appellant to CISF personnel should be included in the assessable value for service tax purposes.
3. Applicability of the extended period of limitation for service tax demand.
4. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
5. Liability for interest on differential service tax demand.

Detailed Analysis:

1. Valuation of Security Services:

The primary issue in this case was whether the security services availed by the appellant from CISF were correctly valued for service tax purposes. The appellant argued that the assessable value should only include the "gross amount charged" by the service provider, as per Section 67 of the Finance Act, 1994. The appellant contended that any additional facilities provided, such as accommodation and transportation, should not be included in the service value since they do not constitute consideration flowing from the service recipient to the service provider. The Tribunal referred to its previous decisions, including the case of NTPC Ltd vs. CCE & ST- Surat-I, where it was held that such facilities are not includable in the assessable value.

2. Inclusion of Free Facilities in Assessable Value:

The Department had contended that the value of free housing, accommodation, and other facilities provided by the appellant to CISF personnel should be treated as additional consideration and included in the service value. However, the Tribunal found that this issue was no longer res integra, as previous judgments, including those by the Supreme Court, had established that only the consideration received by the service provider is taxable. The Tribunal cited the decision in Intercontinental Consultants & Technocrats Pvt. Ltd., where it was held that reimbursable expenses are not includable in the assessable value.

3. Extended Period of Limitation:

The Department invoked the extended period of limitation, alleging suppression of facts by the appellant. However, the appellant argued that they were under a bona fide belief that service tax was not payable on the value of free facilities, and they had furnished all required information. The Tribunal found no evidence of fraud or suppression, and thus, the invocation of the extended period was not justified.

4. Imposition of Penalties:

The appellant was penalized under Sections 76 and 78 of the Finance Act, 1994. The Tribunal held that since the demand on merits was not sustainable, the imposition of penalties was unwarranted. The Tribunal emphasized that a bona fide belief on the appellant's part constituted reasonable cause for any failure to pay service tax, thereby negating the grounds for penalty under Section 78.

5. Interest on Differential Demand:

The Tribunal also addressed the issue of interest on the differential service tax demand. It concluded that since the demand itself was not maintainable, there was no basis for imposing interest on the differential tax liability.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal and providing consequential relief to the appellant. The decision reaffirmed that the valuation of services for tax purposes should strictly adhere to the consideration received by the service provider, excluding any additional facilities provided by the service recipient. The Tribunal's judgment underscored the importance of adhering to established legal precedents and the principles of taxability under Section 67 of the Finance Act, 1994.