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2025 (6) TMI 684 - AT - Service TaxFailure to discharge service tax liability properly - turnover shown in the ST-3 Return is not tallying with the Income Tax records of the appellant - invoice value will include the amount paid to the various security guards by the appellant or not - time limitation - suppression of facts or not. HELD THAT - The appellant has not charged Service Tax from their clients which has been noted by the Commissioner (Appeals) who has given the benefit of cum-tax in terms of Section 67 (2) of the Act. Further it is seen that the Service Tax demand is on the total invoice value which is inclusive of their cost on security persons plus the commission rendered by the appellant. In the cited case of M/s Gurubani Security Pvt. Ltd. 2019 (8) TMI 80 - CESTAT NEW DELHI the same issue was before the Tribunal and the Tribunal has held that it is apparent that the wages and allowances are collected by the Board as an Agency for payment to the concerned persons/authorities. Therefore the wages and allowances are excludible from the value of service tax. Thus the taxable value for the purpose of levy needs to exclude these charges. Once this benefit is granted to the appellant the confirmed demand gets dropped down to about 15% of the amount decided by the Commissioner (Appeals). From this if their turnover on account of three educational institutions is removed it will come down further. Time limitation - suppression of facts or not - HELD THAT - Since appellant was already registered with the Service Tax Department in terms of CBEC Manual the Range Officers are required to scrutinize the Return filed and raise proper queries as has been instructed under the Manual. There is nothing to show that the Returns filed were scrutinized. In this regard no query was raised between the period from 2017 to 2021. Considering the same along with the fact that the quantification of the Service Tax Department is based on the Income Tax Return filed by the appellant it shows that they have not indulged in any activity which indicates suppression on their part. The fact that they have not charged Service Tax shows their bonafide belief. Therefore the appeal is allowed on the ground of time-bar itself. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification of Service Tax Demand Based on Income Tax Records Relevant Legal Framework and Precedents: The demand was raised because the turnover declared in the ST-3 Returns did not match the Income Tax records. The relevant provision for computation of taxable value is Section 67 of the Finance Act, which defines the gross amount charged for taxable services. The appellant's failure to charge service tax from clients was noted, but the Commissioner (Appeals) allowed benefit of cum-tax under Section 67(2) of the Act, which permits certain adjustments. Court's Interpretation and Reasoning: The Tribunal noted that the appellant was registered and had filed ST-3 Returns, and the Revenue's demand was based on data obtained from the Income Tax Department. The Tribunal emphasized that the appellant did not suppress any facts and had a bona fide belief in their tax treatment, as evidenced by their registration and returns filed. Key Evidence and Findings: The appellant provided invoices inclusive of amounts paid to security guards, and the Revenue's demand was on the entire invoice value. The appellant contended that part of this amount was reimbursement and not taxable. Application of Law to Facts: The Tribunal held that the demand needed re-quantification after allowing abatement for wages, salaries, and statutory contributions, as these are not part of the taxable value under Section 67. Treatment of Competing Arguments: The Revenue argued non-regular filing and lack of evidence for exempted services, relying on Income Tax data. The appellant countered with judicial precedents and statutory interpretations supporting exclusion of wages and statutory contributions from taxable value. Conclusion: The Tribunal agreed with the appellant that the demand should be reduced by excluding wages and statutory contributions and that the entire invoice value could not be subjected to service tax. Issue 2: Inclusion or Exclusion of Wages, Salaries, EPF, and ESI Contributions in Taxable Value Relevant Legal Framework and Precedents: Section 67 of the Finance Act governs the computation of taxable value. The Tribunal relied on multiple precedents including the decision in M/s Gurubani Security Pvt. Ltd., the Allahabad High Court ruling in Security Services v. Union of India, and Tribunal decisions such as Security Guards Board for Greater Bombay and Thane District v. Commissioner of Central Excise and Young Brothers Transporters and Contractors v. CCE, Meerut-I. Court's Interpretation and Reasoning: The Tribunal reiterated that amounts paid as wages, salaries, and employer contributions to EPF and ESI are reimbursements or statutory levies and do not constitute consideration for taxable services. These amounts are collected as agency payments for disbursement to security personnel and statutory authorities, and hence excluded from the gross taxable value. Key Evidence and Findings: The appellant's invoices included amounts paid to security guards and statutory contributions. The Tribunal noted the provisions of the Maharashtra Private Security Guards (Regulation of Employment & Welfare) Act, 1981, which mandates the employer to remit wages and allowances to the Security Guards Board, establishing that these payments are pass-through and not part of service consideration. Application of Law to Facts: The Tribunal applied the principle that employer contributions to EPF and ESI, as well as wages paid to security guards, are not subject to service tax and must be excluded from the taxable value. Treatment of Competing Arguments: The Revenue sought to tax the entire invoice value, while the appellant relied on settled legal principles and prior Tribunal and High Court rulings to exclude these amounts. Conclusion: The Tribunal held that the demand must be re-quantified after abatement of wages, salaries, and statutory contributions, thereby reducing the service tax liability. Issue 3: Limitation and Time-Barred Nature of Show Cause Notice Relevant Legal Framework and Precedents: The limitation for issuance of show cause notices under the Finance Act is governed by the extended period provisions, which require suppression or fraud for invocation beyond the normal limitation period. The CBEC Manual instructs Range Officers to scrutinize returns and raise queries promptly. Court's Interpretation and Reasoning: The Tribunal observed that the appellant was registered and had filed returns, which were not scrutinized by the Department for several years (2017 to 2021), and no queries were raised during this period. The demand was based on Income Tax data, not on any concealment or suppression by the appellant. Key Evidence and Findings: The absence of any departmental scrutiny or queries and the appellant's compliance in filing returns indicated no deliberate suppression. Application of Law to Facts: The Tribunal concluded that the extended period could not be invoked as there was no evidence of suppression or fraud by the appellant. Treatment of Competing Arguments: The Revenue contended that the appellant was not regular in filing returns and did not discharge service tax liability properly. The appellant countered by showing their registration, return filing, and bona fide belief. Conclusion: The Tribunal allowed the appeal on the ground of limitation, holding the show cause notice as time barred. 3. SIGNIFICANT HOLDINGS The Tribunal's key legal reasoning and principles include the following verbatim excerpts and conclusions: "As far as the contribution made towards EPF, ESI and salary, the same stand settled in favour of the appellant in view of the decision of Hon'ble High Court of Allahabad and Tribunal's decision in case of Security Guards Board for Greater Bombay and Thane District v. Commissioner of Central Excise... The Employees Provident Fund & Miscellaneous Provisions Act, 1952 and the Employees State Insurance Act, 1948 created the liability upon the principal employer to contribute to the respective funds... Thus, in our considered view, service tax demand cannot be confirmed on the employer's contributed amount towards P.F., E.P.F. and E.S.I." "The wages and allowances are collected by the Board as an Agency for payment to the concerned persons/authorities. Therefore, the wages and allowances are excludible from the value of service tax. Thus, the taxable value for the purpose of levy needs to exclude these charges. The demand is modified to that extent." "Considering the same along with the fact that the quantification of the Service Tax Department is based on the Income Tax Return filed by the appellant, it shows that they have not indulged in any activity which indicates suppression on their part. The fact that they have not charged Service Tax, shows their bonafide belief. Therefore, I allow the appeal on the ground of time-bar itself." Core principles established:
Final determinations:
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