2008 (12) TMI 141 - AT - Service Tax

Held that in cases where an assessee providing taxable service charged the gross value without indicating the service tax element separately, the taxable value realized has to be treated as inclusive of service tax due. This principle of cum-tax value is applicable also to cases even before an explanation to Section 67 was introduced - further, the impugned order had wrongly held that SCN issued beyond the normal period - impugned order holding that larger period not invocable, is not correct

Summary

Issues:
1. Demand of service tax and penalties imposed on a security service provider for not fulfilling statutory obligations.
2. Validity of invoking a larger period for issuing show-cause notices.
3. Applicability of legal principles regarding the inclusion of service tax in gross value for determining tax liability.

Issue 1: Demand of service tax and penalties:
The case involves M/s. Robot Detective and Security Agency, a security service provider, who failed to fulfill statutory obligations, including payment of service tax. Show-cause notices were issued proposing to recover service tax and impose penalties for services provided to various customers. The original authority confirmed the demand of service tax and imposed penalties as proposed. The Commissioner (Appeals) affirmed the demand of service tax, interest, and penalties, while vacating certain penalties. The Revenue appealed against the order setting aside the demand of service tax, interest, and penalties related to services provided to a specific client, arguing that the larger period could be invoked, citing legal precedents. The Tribunal allowed the Revenue's appeal, emphasizing that the Department could issue notices invoking a larger period, and the impugned order was passed in accordance with the law.

Issue 2: Validity of invoking a larger period:
The Commissioner (Appeals) set aside the demand of service tax, interest, and penalties against M/s. Robot for services rendered to a specific client, deeming the notice as barred by limitation. The Revenue contended that the Department could invoke a larger period, supported by legal precedents. The Tribunal held that the Department's knowledge in a parallel proceeding did not bar it from invoking an extended period of limitation for the same assessee. It was emphasized that the Department could gather full particulars before issuing show-cause notices, and the impugned order was set aside based on legal principles from relevant judgments.

Issue 3: Inclusion of service tax in gross value for tax liability:
M/s. Robot appealed against orders affirming the demand of service tax, interest, and penalties, requesting to treat the gross value realized as inclusive of service tax for redetermining their liability. The Tribunal considered this plea, noting that where a service provider charged gross value without separately indicating the service tax element, the taxable value should be treated as inclusive of service tax. Citing a relevant legal precedent, the Tribunal allowed the appeals by remanding the case to the original authority to redetermine the service tax liability based on the receipts as cum-tax value, ensuring the assessee receives an effective hearing before the redetermination.

This detailed analysis covers the issues related to the demand of service tax, invoking a larger period for show-cause notices, and the inclusion of service tax in the gross value for determining tax liability in the legal judgment by the Appellate Tribunal CESTAT, CHENNAI.