2014 (4) TMI 59 - AT - Service Tax

Demand of service tax - providing security services to other group companies - No profit motive - Suppression of facts - Invocation of extended period of limitation - Interest u/s 75A - Penalty u/s 76 77 78 - Held that - the nature of service rendered by the appellant was only security services and nothing else. - If the appellant had indeed rendered a multiplicity of services the charges would have varied every month which also is a pointer towards the fact that the appellant rendered only one type of service. As regards the claim of the appellant that they were operating on no profit no loss basis and therefore cannot be considered as a commercial concern this argument is without any merit. - the appellant cannot claim that they were not operating as a commercial concern. - there is no evidence available on record to show that the income received by the appellant was completely disbursed by way of payment of salaries. - it is difficult to conclude that the appellant was operating on no profit and no loss basis. Bonafide belief is not blind belief but has to be based on reasonable measures taken to entertain such belief. There is nothing in the records to show that the appellant consulted either the department or obtained any legal opinion as their liability towards service tax. Inasmuch as the appellant did not obtain any registration nor did they follow any of the statutory procedures the appellant had clearly suppressed the facts from the department with an intent to evade service tax. In these circumstances the confirmation of duty demand invoking the extended period of time along with interest thereon cannot be faulted. Consequently the appellant is also liable to penalty under the provisions of the Finance Act 1994 - Decided against the assessee.

Summary

Issues:
1. Appellant providing security services without registering for service tax.
2. Dispute over the nature of services provided by the appellant.
3. Appellant's claim of operating on a no-profit-no-loss basis.
4. Appellant's contention of not suppressing facts to evade service tax.

Analysis:
1. The appeal challenged a demand for service tax on security services provided by the appellant to group companies. The investigation revealed the appellant was not registered for service tax despite receiving substantial consideration for services rendered. The appellant contested the levy, arguing they provided various services beyond security. However, evidence indicated the appellant primarily offered security services, as confirmed by statements and documents.

2. The appellant claimed to offer services like maintenance, auditing, and financial advice in addition to security. However, statements from company officials and documentary evidence emphasized the predominant provision of security services. Lack of detailed billing records and reliance on circulars without specific service details weakened the appellant's argument, leading to the conclusion that security services were the main offering.

3. The appellant argued they operated on a no-profit-no-loss basis, exempting them from service tax liability. The Tribunal rejected this claim, noting the appellant charged the group companies for services rendered, treated the income as business revenue, and failed to provide evidence supporting their no-profit-no-loss status. The lack of proof regarding complete salary reimbursement further undermined this argument.

4. The appellant contended they did not suppress facts to evade service tax, seeking to avoid penalties. However, the Tribunal found no evidence of the appellant's consultation with tax authorities or legal experts regarding their tax obligations. The failure to register or follow statutory procedures indicated an intent to evade tax, justifying the imposition of penalties and confirming the duty demand.

In conclusion, the Tribunal dismissed the appeal, upholding the service tax demand, interest, and penalties. The judgment highlighted the appellant's predominant provision of security services, rejected claims of no-profit-no-loss operation, and established the appellant's suppression of facts regarding service tax obligations.