2018 (6) TMI 436 - AT - Service Tax

Security services - sub-contract - demand of ₹ 13,21,165/- which according to the appellant is the amount received for the security services which have been outsourced by the appellant - Board s Circular No.96/7/2007-ST dated 23.8.2007 - Penalty - Held that - The issue whether the demand of ₹ 13,21,165/- can sustain or not requires to be reconsidered by the adjudicating authority, for which we remand the matter to the said authority - matter on remand. Penalty - Short payment of service tax - tax collected from customers but not paid - Held that - The appellant on bonafide belief that they are not liable to pay service tax on services outsourced had not discharged demand on such amount - in respect of services which the appellant was rendering directly, they have discharged the service to the tune of ₹ 17,05,817/- which is much prior to the issue of show cause notice. Therefore, the penalty imposed on this count cannot sustain - penalty set aside. Appeal allowed in part and part matter on remand.

Summary

Issues:
- Failure to pay service tax collected from customers
- Imposition of penalties and interest
- Disputed demand for service tax on outsourced services
- Inclusion of reimbursable expenses in taxable value
- Contesting penalty imposition

Analysis:

The case involves the appellant, a service provider registered with the Service Tax Department for security agency services, who failed to pay service tax collected from customers for a specific period. After an audit, a show cause notice was issued, leading to the confirmation of the demand, interest, penalties, and appropriation of the amount already paid by the appellant. The appellant contested the demand related to services outsourced to another agency, arguing that they had already discharged the service tax amount before the notice was issued. The appellant claimed that the demand was unwarranted, as they did not retain any amount from the outsourced services.

Regarding the disputed demand for service tax on outsourced services, the appellant maintained that they were not liable to pay service tax on the amount received for the outsourced security services. They cited a relevant Board's Circular and requested a reconsideration of the matter by the adjudicating authority. The issue of including wages, salary, and other expenses in the taxable value was also raised, emphasizing that such reimbursable expenses should be excluded from the total taxable value.

On the question of penalties, the appellant argued that the penalty imposition was contentious due to the interpretational issue of including reimbursable expenses in the taxable value. The appellant successfully contended that they had already discharged the service tax for the services they rendered directly before the show cause notice was issued. Consequently, the penalty imposed on this count was set aside. The Tribunal modified the impugned order by setting aside the penalty and remanding the issue of the disputed demand for outsourced services back to the adjudicating authority for reconsideration.

In conclusion, the Tribunal disposed of the appeal by setting aside the penalty imposition and remanding the matter concerning the disputed demand for outsourced services, providing consequential relief to the appellant.