2025 (4) TMI 370 - AT - Service Tax

Liability of appellant the Central Industrial Security Force (CISF) to pay service tax for providing Security Agency Services (SAS) to Bharat Dynamics Ltd. from 18.04.2006 to 31.12.2011 - levy of interest and penalty - HELD THAT - There is no dispute on the merit of leviability of service tax under the head Security Agency Services therefore the leviability of service tax for the period beyond 01.04.2009 as held by the Adjudicating Authority is correct and there are no infirmity in the said order. Levy of interest thereon in respect of service tax short paid/not paid/late paid - HELD THAT - The Statutory Provision under Section 75 of the Finance Act is quite clear that for any delayed payment amount is liable to be levied to service tax or service tax short paid/not paid interest is payable. Since this is a Statutory Provision under the Act and the Tribunal being a creation of Statute it cannot go beyond the provision of the Statute itself. Therefore the imposition of interest under Section 75 to the extent of demand upheld by Commissioner is correct and we upheld the same. However this amount needs to be calculated and to be paid by the appellant. Imposition of penalty under Section 78 - HELD THAT - Admittedly CISF is Central Armed Police Force under the Ministry of Home Affairs. The charges for invoking the extended period and levy of penalty is contained in Para 8 of the show cause notice from which there are no substantive and positive evidence which would have required imposition of penalty under Section 78. A mere delay due to interpretational issue cannot be termed as a deliberate attempt with an intent to evade payment of service tax. The Department had to come out with ad-hoc exemption to waive the demand for the period prior to April 2009. In this case it is also apparent that the CISF on their own has also paid certain amount - there are much force in the argument of the Learned Advocate that the elements required for imposition of penalty under Section 78 is not available in the factual matrix of the case and therefore the imposition of penalty under Section 78 by the Adjudicating Authority is not sustainable and therefore it is set aside to that extent. In so far as penalty under Section 77 is concerned in the facts of the case this penalty is also not sustainable as it is already held there could have been a genuine interpretational issue in regard to payment of service tax especially in view of exemption notification issued by the Government as well as further clarification issued and their being a Government Agency it is found that penalty imposed under Section 77 by the Adjudicating Authority is not sustainable and therefore we set aside the same. The impugned order is upheld in so far as it relates to the demand of the duty and imposition of interest. However it is set aside to the extent of imposition of penalty under Section 78 and under Section 77. Conclusion - i) The appellant is liable for service tax for the period beyond 01.04.2009. ii) The imposition of interest under Section 75 is upheld with the amount to be calculated and paid by the appellant. iii) Penalties under Sections 77 and 78 are not sustainable and are set aside. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the appellant, the Central Industrial Security Force (CISF), is liable to pay service tax for providing Security Agency Services (SAS) to Bharat Dynamics Ltd. from 18.04.2006 to 31.12.2011.
• Whether the appellant is liable to pay interest on the service tax for the period beyond 01.04.2009.
• Whether the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994, is justified.
• Whether salary arrears due to the 6th Pay Commission revision should be excluded from the taxable value.

2. ISSUE-WISE DETAILED ANALYSIS

Liability for Service Tax

• Relevant Legal Framework and Precedents: The definition of Security Agency Services was amended to include 'any person' instead of 'any Commercial Concern,' making CISF liable for service tax from 18.04.2006.
• Court's Interpretation and Reasoning: The Tribunal noted that the appellant conceded the merit of the leviability of service tax under Security Agency Services for the period beyond 01.04.2009.
• Application of Law to Facts: The Tribunal found no infirmity in the Adjudicating Authority's order regarding the leviability of service tax post 01.04.2009.
• Conclusion: The appellant is liable for service tax for the period beyond 01.04.2009.

Liability for Interest

• Relevant Legal Framework: Section 75 of the Finance Act mandates interest on delayed payment of service tax.
• Court's Interpretation and Reasoning: The Tribunal emphasized that as a statutory provision, interest is payable on delayed payments, and the Tribunal cannot override statutory mandates.
• Conclusion: The imposition of interest under Section 75 is upheld, with the amount to be calculated and paid by the appellant.

Imposition of Penalties under Sections 77 and 78

• Relevant Legal Framework and Precedents: Section 78 involves penalties for deliberate evasion of service tax. The Tribunal referenced judgments such as BSNL Vs Commissioner of Service Tax and Surat Municipal Corporation Vs CCE, Surat, which emphasize the absence of intent to evade in public sector undertakings.
• Court's Interpretation and Reasoning: The Tribunal found no substantive evidence of deliberate intent to evade tax by CISF, a government agency. The delay was attributed to interpretational issues and not to intentional evasion.
• Key Evidence and Findings: The absence of substantive evidence in the show cause notice and the appellant's voluntary payment of certain amounts were pivotal.
• Conclusion: Penalties under Sections 77 and 78 are not sustainable and are set aside.

Exclusion of Salary Arrears from Taxable Value

• Key Evidence and Findings: The Adjudicating Authority had already provided relief based on the evidence presented by the appellant regarding salary arrears.
• Conclusion: The Tribunal acknowledged the difficulty in providing further evidence due to the age of the matter, implicitly accepting the Adjudicating Authority's decision.

3. SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reinforced that statutory provisions under the Finance Act, such as those concerning interest, must be adhered to, but penalties require substantive evidence of intent to evade.
• Final Determinations on Each Issue: The demand for service tax and interest is upheld, while penalties under Sections 77 and 78 are set aside.
• Verbatim Quotes of Crucial Legal Reasoning: "A mere delay due to interpretational issue cannot be termed as a deliberate attempt with an intent to evade payment of service tax."

The appeal is partly allowed, with the Tribunal upholding the demand for service tax and interest, but setting aside the penalties under Sections 77 and 78 of the Finance Act, 1994.