2019 (10) TMI 1207 - AT - Service Tax

Extended period of limitation - demand of differential duty - demand of service tax on the gross amount including salary of the security guards, PF, ESI etc. - penalty - HELD THAT - As per Section 67, the gross amount charged towards providing service shall be liable to service tax. As regards the salary of security guards, PF and ESI, the same is not an expenditure incurred by the appellant on behalf of the service recipient. The service recipient is concerned about the overall provision of security service irrespective of bifurcation of payment of service paid by the service recipient to the appellant. Therefore, it cannot be said that salary of guards, PF, ESI etc. are reimbursable expenditures to be deducted from the gross value of security service. Therefore, we do not agree with the appellant (assessee) that only the commission portion is liable to tax and not the gross value. Time Limitation - HELD THAT - From the beginning the appellant were paying service tax only on the commission portion without adding the value towards salary of guards, PF, ESI etc. They have declared to the department on the said value on which the service tax is paid which is representing only commission. Therefore, the department is of the belief that the appellant is paying service tax on the gross value of security service provided by them to their recipient of service - it cannot be said that the appellant was under bonafide belief that only commission is chargeable to service and not the total gross value of service provided by them - the show cause notice has rightly invoked extended period and therefore, the demand for the extended period is sustained. Penalty u/s 78 - HELD THAT - Since the appellant despite clear provisions for value of security service, paid service tax on commission only, the bonafide is not proved. Hence, the penalty imposed under Section 78 is maintained. Benefit of reduced penalty - HELD THAT - On perusal of the adjudication order, it is clear that the Adjudicating Authority has not given the benefit of 25% penalty in writing in the adjudication order. Therefore, the Commissioner (Appeals) is legally correct in extending the benefit of 25% penalty. Appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of service tax liability on gross amount vs. commission only, applicability of extended period for demand, validity of penalty under Section 78, availability of 25% reduced penalty benefit.

Interpretation of Service Tax Liability:
The appellant provided security services and paid service tax only on the commission amount, excluding salary of security guards, PF, ESI. The department contended that service tax should be paid on the gross amount, including these expenses. The tribunal held that as per Section 67, the gross amount charged for services is liable to service tax. The salary, PF, ESI are not reimbursable expenditures and cannot be deducted from the gross value. Therefore, the tribunal disagreed with the appellant's contention that only the commission amount is taxable.

Applicability of Extended Period for Demand:
The appellant had been paying service tax only on the commission amount without including the salary of guards, PF, ESI. The tribunal noted that there was no ambiguity in the provisions regarding the value on which service tax should be charged for security services. It held that the appellant's belief that only commission was taxable was not bona fide. Therefore, the tribunal upheld the demand for the extended period.

Validity of Penalty under Section 78:
Since the appellant did not pay service tax on the correct value of security services despite clear provisions, the tribunal found that their actions were not bona fide. Consequently, the penalty imposed under Section 78 was maintained.

Availability of 25% Reduced Penalty Benefit:
The Revenue contested the benefit of a 25% reduced penalty granted by the Commissioner (Appeals). The tribunal observed that as per a Supreme Court decision, the option of a reduced penalty should be explicitly given in writing by the Adjudicating Authority. Since this was not done in the present case, the Commissioner (Appeals) was correct in extending the benefit of the reduced penalty. Therefore, the Revenue's appeal against the reduced penalty was dismissed.

In conclusion, both the Assessee's appeal and the Revenue's appeal were dismissed, with the tribunal upholding the demand for the extended period and the penalty under Section 78, while affirming the availability of the 25% reduced penalty benefit.