2018 (1) TMI 556 - AT - Service Tax

Penalties u/s 77 and 78 of FA, 1994 - Valuation - inclusion of salary of the security personnel in the value of the service to be provided by security agents services or not? - Held that - the issue was the subject matter of litigation before various higher forums. As such, it can be concluded that the issue was not free from the doubt, thus leading to a bonafide belief on the part of the appellant that no service tax is liable to be paid on the same - As soon as the Revenue pointed out the said fact to the appellant, they deposited the service tax alongwith interest - penalty cannot be invoked - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Challenge to confirmation of demand and imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
The judgment involves an appeal where both the appellant and the Revenue challenged the order of the Commissioner (Appeals). The Commissioner upheld the confirmation of demand but granted the benefit of cum-duty to the assessee. The Revenue appealed against this decision, while the assessee contested the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant, a partnership firm of Ex-Service men providing security services, was under scrutiny for not including the salaries of security guards in the value of services for which they were registered and paying Service Tax. The Additional Commissioner confirmed the demand and imposed penalties under Sections 76 and 70 of the Finance Act, 1994. The Commissioner (Appeals) upheld the penalties but treated the entire consideration as cum duty, leading to separate appeals by the appellant and the Revenue.

The issue of cum duty price was settled by previous judgments of Higher Courts, and the order of the Commissioner (Appeals) was found to be in order regarding this aspect. Therefore, the Revenue's appeal was rejected. On the other hand, the assessee's challenge was focused on the penalties imposed under Sections 77 and 78 of the Finance Act, 1994. The appellant argued that they believed security personnel salaries were not part of the service tax value based on various sources and advertisements. The appellant claimed a bonafide belief due to the ongoing litigation on the inclusion of security personnel salaries in the service tax value. Upon realizing the error, the appellant promptly paid the service tax with interest. The Tribunal acknowledged the lack of malafide intent on the appellant's part and set aside the penalties imposed, allowing the appeal to that extent. Both appeals, one by the appellant and the other by the Revenue, were disposed of accordingly.