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2025 (4) TMI 370 - AT - Service TaxLiability of appellant the Central Industrial Security Force (CISF) to pay service tax for providing Security Agency Services (SAS) to Bharat Dynamics Ltd. from 18.04.2006 to 31.12.2011 - levy of interest and penalty - HELD THAT - There is no dispute on the merit of leviability of service tax under the head Security Agency Services therefore the leviability of service tax for the period beyond 01.04.2009 as held by the Adjudicating Authority is correct and there are no infirmity in the said order. Levy of interest thereon in respect of service tax short paid/not paid/late paid - HELD THAT - The Statutory Provision under Section 75 of the Finance Act is quite clear that for any delayed payment amount is liable to be levied to service tax or service tax short paid/not paid interest is payable. Since this is a Statutory Provision under the Act and the Tribunal being a creation of Statute it cannot go beyond the provision of the Statute itself. Therefore the imposition of interest under Section 75 to the extent of demand upheld by Commissioner is correct and we upheld the same. However this amount needs to be calculated and to be paid by the appellant. Imposition of penalty under Section 78 - HELD THAT - Admittedly CISF is Central Armed Police Force under the Ministry of Home Affairs. The charges for invoking the extended period and levy of penalty is contained in Para 8 of the show cause notice from which there are no substantive and positive evidence which would have required imposition of penalty under Section 78. A mere delay due to interpretational issue cannot be termed as a deliberate attempt with an intent to evade payment of service tax. The Department had to come out with ad-hoc exemption to waive the demand for the period prior to April 2009. In this case it is also apparent that the CISF on their own has also paid certain amount - there are much force in the argument of the Learned Advocate that the elements required for imposition of penalty under Section 78 is not available in the factual matrix of the case and therefore the imposition of penalty under Section 78 by the Adjudicating Authority is not sustainable and therefore it is set aside to that extent. In so far as penalty under Section 77 is concerned in the facts of the case this penalty is also not sustainable as it is already held there could have been a genuine interpretational issue in regard to payment of service tax especially in view of exemption notification issued by the Government as well as further clarification issued and their being a Government Agency it is found that penalty imposed under Section 77 by the Adjudicating Authority is not sustainable and therefore we set aside the same. The impugned order is upheld in so far as it relates to the demand of the duty and imposition of interest. However it is set aside to the extent of imposition of penalty under Section 78 and under Section 77. Conclusion - i) The appellant is liable for service tax for the period beyond 01.04.2009. ii) The imposition of interest under Section 75 is upheld with the amount to be calculated and paid by the appellant. iii) Penalties under Sections 77 and 78 are not sustainable and are set aside. Appeal allowed in part.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Liability for Service Tax
Liability for Interest
Imposition of Penalties under Sections 77 and 78
Exclusion of Salary Arrears from Taxable Value
3. SIGNIFICANT HOLDINGS
The appeal is partly allowed, with the Tribunal upholding the demand for service tax and interest, but setting aside the penalties under Sections 77 and 78 of the Finance Act, 1994.
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