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TMI Blog2008 (11) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... is deploying ex-servicemen for providing security service to their clients. When the 'Security Agency Service' became taxable with effect from 16-10-1998, the appellant applied for service tax registration and were issued a registration certificate on 7-12-1998. Since even after obtaining service tax registration, the appellant neither paid service tax nor were they filing any returns, they were asked by the revenue vide letter dated 29-7-1999 to file the half yearly ST-3 returns, to which the appellant, vide letters dated 4-8-1999 and 28-3-2003 replied that being an organization set up by the Punjab Government for welfare and rehabilitation of ex-servicemen, they, not having any profit motive, are not a 'commercial concern' and hence are not liable to pay the service tax. The revenue, however, vide letters dated 30-4-2003 and 14-7-2003 clarified to the appellant that they have to pay the service tax. The appellant were asked by the revenue vide letter dated 8-8-2003 to pay the service tax for the past period from October 1998 to March 2003 with interest. In response to the revenue's direction, the appellant paid a total service tax of Rs. 1,41,06,096 during September 2003 to 1-3- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l concern'. The Tribunal, vide order dated 11-4-2007, while expressing its view that the Hon'ble High Court has set aside the Tribunal's order with a direction to take a fresh decision not only on the question of limitation but also on other grounds raised, directed the revenue to seek clarification in this regard from the Hon High Court. On the revenue's petition for clarifications, the Hon'ble High Court passed the following order on 3-8-2007- "A perusal to para 2 of the order dated 11-4-2007, passed by the Customs, Excise and Service Tax Appellate Tribunal, shows that the Tribunal has rightly understood the order passed by this Court on 19-2-2007 when it observed that this Court has set aside the order of the Tribunal dated 6-10-2006 which was passed earlier by the Tribunal. Accordingly, we find no further clarification would be necessary." Accordingly, the appeal is being take up for decision afresh. 2. Heard both the sides. 2.1 Shri Ashish Chopra, Advocate, the learned counsel on behalf of the appellant, made the following submissions- (1) The appellant had obtained service tax registration on 7-12-1998 and their activity was known to the revenue. There was long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in commercial activities, having profit as the primary commercial, and that it is the totality of its activities and objective of its existence that determine the commercial nature of an institution as commercial concern. Looked at from this criteria, the appellant Corporation is not a commercial concern. (6) Even if the appellant are treated as a Security Agency, the service tax is not chargeable on the gross amount charged from the clients which also includes the security personnel's salary, but is chargeable only on the commission which the appellant get. In this regard, reliance is placed on Tribunal's judgment in case of Malabar Management Services (P.) Ltd. v. CST [2008] 14 STT 107 (Chennai-CESTAT). (7) The appellant being a State Government Undertaking, there is no question of intention to evade the tax. Therefore there is no justification for imposition of penalty on them. 2.2 Shri Amit Jain, the learned Departmental Representative made the following submissions:- (1) The show-cause notice dated 22-4-2004 is not barred by limitation as during the period prior to 10-9-2004, in section 73 mere omission or failure to file the return under section 70 was suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exposition of the law. Tribunal in cases of New Industrial Security v. CCE [2007] 7 STT 115 (New Delhi-CESTAT) and Panther Detective Services v. CCE [2007] 8 STT 215 (New Delhi-CESTAT) has held that in case of Security Agency's service, the service tax is chargeable on the gross amount, including the salary of the security personnel. (5) When the appellant were collecting service tax from their customers, there is no question of bona fide belief for not being liable to pay the service tax. The appellant, therefore, are liable for penalty under sections 76 and 78. 3. We have carefully considered the submissions from both the sides. 4. The first point of dispute is as to whether the demand for service tax for the period from October 1998 to December 2002 raised vide show-cause notice dated 22-4-2004 is within time or the same is time-barred. The appellant's contention is that since in this case the correspondence between the appellant and the revenue on the question as to whether the appellant are liable to pay the service tax was going on since July 1999 and there has been a long correspondence on the question of appellant's liability to pay the service tax betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words 'one year', the words 'five years' had been substituted." [Emphasis supplied] 4.2 From a reading of the provisions of section 73(1), as the same existed during the period of dispute i.e., during the period prior to 10-9-2004, and as the same existed with effect from 10-9-2004, it is clear that during the period of dispute, the existence for fraud, collision, wilful misstatement, suppression of fact, or contravention of the provisions of Finance Act, 1994 or of the Rules made thereunder with intent to evade the payment of tax, were not required for invoking the longer limitation period and all that was required for invoking the longer period was omission or failure on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(94) of the Finance Act, 1994 during the period of dispute. It has been pleaded that the appellant Corporation is a corporation set up under PESCO Act for welfare and rehabilitation of ex-servicemen and it has no profit motive. First of all, this contention of the appellant is not factually correct. As per the provisions of section 15(2) of the PESCO Act, under which the Appellant Corporation was constituted, its main charter of function is to "plan, promote and undertake, on its own or in collaboration with or through such ex-servicemen organizations or other agencies, as may be approved by the corporation, programmes of agricultural development, marketing, processing supply and storage of agricultural produce, small scale industry, building construction, transport and such other business, trade or activity, as may be approved in this behalf by the Government." As per sub-section (3) of section 15 of PESCO Act, the corporation in discharging its functions, shall have due regard to public interest, its solvency and welfare of ex-servicemen. Under section 16(1) of PESCO Act, the appellant Corporation can raise money by borrowing from Bank or other Financial institutions, issue of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corporation is a commercial concern or a non-commercial concern. An organization may be a charitable organization established for some charitable purposes, but it may still engage in commercial activities, as without any commercial activities, the income required for charitable purposes cannot be generated. For levy of service tax, it is the activity of an organisation which is relevant, not its objective. This principle was upheld by the Hon'ble Supreme Court in the context of Income-tax in case of CIT v. Thakur Das Bhangava [1960] 40 ITR 301 wherein it was held that the amount received by the respondent attracted tax as soon as it was received by him as his professional income and its future destination or application was irrelevant for taxing purposes. 5.2 The appellant have cited the Tribunal's judgments in the cases of Sikar Ex-servicemen Welfare Co-operative Society Ltd. (supra), Kerala State Ex-service League s case (supra), Board of Control for Cricket in India case (supra) and Ex-services Security Co-operative Society Ltd.'s case (supra). 5.2.1 In the Tribunal judgment in the case of Sikar Ex-servicemen Welfare Society Ltd. (supra), the issue involved was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied to the present case. 5.2.4 In the case of Kerala State Ex-Service League (supra) issue was as to whether the appellant, a charitable society registered under Travancore Cochin Societies Registration Act, 1955 and whose objective is to look after the economic and welfare matters of ex-servicemen and their families, is a commercial concern. In this case, the appellant relying upon the Supreme Court's judgment in case of Sai Publication Fund and State of Tamilnadu (supra) and Board of Trustees of the Port of Madras 'case (supra) pleaded that a "commercial concern" is a concern which should earn profits, that the appellant are not a commercial concern and are not earning profits, that they are not preparing balance sheet and profit and loss account, and that as per the above judgments of the Supreme Court, in order to hold a concern to be a "commercial concern", it has to have profit motive, which is relevant where the person carries on trade, commerce or manufacture. The Tribunal in this case accepting the contention of the appellant remanded the matter to the original adjudicating authority for de novo adjudication of the question as to whether or not the appellants a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission to cover the administrative expenses and profit. It prepares annual profit and loss account and balance sheet. It is expected to generate resources to sustain itself and not fall into insolvency. It is free to deploy its funds in carrying out its functions which include marketing, processing, supply and storage of agricultural produce, small scale industry, building construction, transport and other business, trade or activity, as approved by the Government and it can invest the surplus funds generated in Government securities or in such other manner as it may decide. The appellant corporation, therefore, functions like a 'commercial concern'. 5.4 In view of the above, we do not accept the appellant's contention that they are not a 'commercial concern'. 6. The next question to be decided is as to whether the service tax is to be charged on the gross value including the salary of the security personnel provided or only on the commission. Tribunal in the case of New Industrial Security Force (supra) and Panther Detective's case (supra) and Hon'ble Madras High Court in the case of GDA Security (P.) Ltd. v. Union of India 2002 (140) ELT 332/[2006] 5 STT 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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