2010 (8) TMI 140 - AT - Service Tax

Security Agency demand - on the ground that the value of services provided by them and as disclosed in ST-3 returns is much less than the total value of income reflected in income-tax return and profit & loss account - excess income was from other services which were in the nature of Investigation services, Helper services, Peon services, Mali services, Electrician services, Aya services and Nursing services - as the said services were non-taxable earlier show-cause notices, though were on the same ground - The same cannot, at this prima facie stage, by held to be reflecting any knowledge on the part of the revenue officers that even for the subsequent period, the appellant is going to adopt the same modus operandi.

Summary

Issues involved:
1. Condition of pre-deposit of service tax
2. Nature of services provided and tax liability
3. Limitation period for demand of service tax
4. Financial hardship and pre-deposit amount

Analysis:

1. Condition of pre-deposit of service tax:
The appellant, a registered "Security Agency," sought to dispense with the pre-deposit condition of service tax amounting to Rs. 14,87,288 confirmed against them for the period 2002-03 to 2004-05. The demand was based on the argument that the value of services provided by the appellant, as per income-tax returns and profit & loss account, was higher than what was disclosed in the ST-3 returns.

2. Nature of services provided and tax liability:
The appellant claimed that the excess income was from non-taxable services like Investigation services, Helper services, Peon services, etc., for which they argued no service tax was applicable. However, the Commissioner (Appeals) rejected this plea, stating that the appellant failed to provide documentary evidence supporting their claim. The Commissioner observed that one of the clients paid service tax on the total consideration amount, including sanitation charges, indicating a potential liability on the total value of services provided.

3. Limitation period for demand of service tax:
The appellant raised a contention on the point of limitation, citing earlier show-cause notices issued on similar grounds. The appellant argued that the law laid down by the Supreme Court in a specific case should apply. However, the revenue argued that there was suppression on the part of the appellant, justifying a longer limitation period. The Tribunal found that the earlier notices did not imply knowledge of future actions, and suppression by the appellant did not affect the limitation period.

4. Financial hardship and pre-deposit amount:
The appellant did not provide substantial evidence of financial hardship, merely stating they were in financial difficulty. The Tribunal noted that the appellant had collected service tax from clients and had a higher income. Considering the facts and circumstances, the Tribunal directed the appellant to deposit Rs. 7 lakhs within eight weeks, waiving the pre-deposit of the remaining amount of duty and penalty, pending compliance verification on a specified date.

This judgment highlights the importance of substantiating claims with evidence, the implications of suppression on limitation periods, and the consideration of financial circumstances in deciding pre-deposit amounts in service tax disputes.