2008 (12) TMI 56 - AT - Service Tax

Security service - non-payment of tax contention of appellant that they received the service charge without the amount of service tax from their client and therefore, they are not liable to pay the tax, is not accepted - appellant deposited a portion of the tax before passing of the adjudication order & he is a small entrepreneur so penalty u/s 76 is reduced - demand of tax & interest upheld since appellant provided the service to a semi-Government body, penalties u/s 78 is not warranted

Summary

Issues:
1. Appeal against order-in-appeal dated 5.10.06 passed by the Commissioner (Appeals), Bhopal regarding demand of service tax.
2. Applicability of service tax on security services provided to a Semi Govt. body.
3. Dispute regarding non-payment of service tax by the appellant.
4. Imposition of penalties under sections 76, 75A, 77, and 78 of the Finance Act, 1994.
5. Reduction of penalty under Section 76 due to procedural lapses and appellant's status as a small entrepreneur.

Analysis:
1. The appeal was filed against the order-in-appeal dated 5.10.06 passed by the Commissioner (Appeals), Bhopal, confirming a demand of service tax amounting to Rs.8,67,542/- for the period from 16.10.98 to 31.12.02. The adjudicating authority also imposed penalties under various sections of the Finance Act, 1994. The Commissioner (Appeals) modified the penalty under section 76 but upheld the demand of tax with interest.

2. The appellant, engaged in providing security services, had entered into an agreement with a Semi Govt. body for providing such services. The appellant contended that they did not receive the service tax amount from their client and hence did not deposit the tax. However, the Tribunal held that the appellant's receipt of service charge without the service tax amount does not absolve them from the liability to pay the tax.

3. The appellant had deposited a portion of the tax before the adjudication order was passed, with the balance amount being deposited later as per a stay order of the Tribunal. The Tribunal noted that the appellant's failure to pay the tax on time was detected during scrutiny, and the appellant's argument of delay in filing returns being a procedural lapse was not accepted. Consequently, penalties under Section 76 of the Act were imposed, albeit reduced to Rs.50,000 considering the appellant's status as a small entrepreneur.

4. The Tribunal found that the penalty under Section 78 of the Finance Act, 1994 was not warranted due to the appellant providing services to a semi-Government body. While penalties under section 75A and 77 were imposed, the penalty under Section 76 was reduced due to the appellant's registration with the Central excise authorities and the nature of the delay in filing returns.

5. In conclusion, the Tribunal upheld the demand of tax with interest, set aside penalties under section 78, and reduced the penalty under Section 76 to Rs.50,000, considering the appellant's circumstances as a small entrepreneur providing security services. The appeal was disposed of accordingly.