2025 (6) TMI 452 - AT - Service Tax

Wrongful availment of benefit of the N/N. 30/2012-ST dated 20.6.2012 - suppression of facts or not - invocation of extended period of limitation - HELD THAT - This Bench in its decision in the case of Sahara Ex-Servicemen Welfare Co-Operative Society Limited 2025 (1) TMI 1206 - CESTAT NEW DELHI held that The appellant admittedly is a co-operative society registered under Rajasthan Co-operative Society Act 2001. The copy of certificate of registration is also produced by the appellant. There is no evidence to the contrary by the department. In the light of above observations with respect to Notification No. 30/2012 we hold that the appellant being a co-operative society was very much eligible for the abatement/exemption of 75% of the tax liability. The Order-in-Original has denied the said exemption holding the appellant is not the Association of Person . To our understanding the said comparison is not required for the purpose of the impugned notification. It is an admitted fact that 25% of tax liability has been discharged by the appellant. In light of this discussion the confirmation of remaining 75% of the gross value as service tax from appellant is not sustainable. Conclusion - i) A co-operative society registered under law qualifies as an association of persons for the purpose of Notification No. 30/2012-ST and is entitled to the 75% abatement on taxable value for security agency services provided to a body corporate. ii) Payment of service tax on 25% of the taxable value by the service provider and 75% by the service receiver is the correct application of the notification. iii) Invocation of the extended period of limitation requires proof of suppression or intent to evade tax which is absent where the appellant complies with the notification. The impugned order is set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal were:

(a) Whether the appellant, a co-operative society registered under the relevant law and engaged in providing security agency services, was entitled to the benefit of Notification No. 30/2012-ST dated 20.6.2012, which provides for a 75% abatement of service tax liability where an "association of persons" provides security services to a body corporate, thereby paying only 25% of the tax themselves while the service receiver pays the remaining 75%.

(b) Whether the appellant had suppressed facts or evaded tax so as to justify invocation of the extended period of limitation for demand of service tax under the Finance Act, 1994.

(c) Whether the demand of service tax, interest, and penalty confirmed by the Commissioner (Appeals) was legally sustainable in light of the above issues.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Entitlement to Benefit under Notification No. 30/2012-ST

Relevant Legal Framework and Precedents: The key statutory provision is Notification No. 30/2012-ST dated 20.6.2012, which grants an abatement of 75% on taxable value for certain services provided by an "association of persons" to a body corporate, resulting in only 25% of the service tax being payable by the service provider. Section 65B(37) of the Finance Act, 1994 defines "person," which includes an "association of persons." The Tribunal had earlier examined a similar issue in the case of Sahara Ex-Servicemen Welfare Co-Operative Society Limited, where it was held that a co-operative society registered under law qualifies as an "association of persons" and is thereby eligible for this abatement.

Court's Interpretation and Reasoning: The Tribunal emphasized that the appellant is a co-operative society registered under the Rajasthan Co-operative Society Act, 2001, and there was no evidence to dispute this fact. The notification explicitly includes co-operative societies in the category of persons entitled to the abatement. The Tribunal noted that the appellant had discharged 25% of the service tax liability, consistent with the notification's scheme. The adjudicating authority's denial of the abatement on the ground that the appellant was not an "association of persons" was found to be incorrect and unnecessary, as the definition and notification clearly covered co-operative societies.

Key Evidence and Findings: The appellant produced a certificate of registration as a co-operative society, which remained uncontested. The appellant had paid service tax on 25% of the taxable value, and the service receivers had paid tax on the remaining 75%.

Application of Law to Facts: Applying the notification and the definition of "person," the Tribunal concluded that the appellant was entitled to the benefit of the 75% abatement. The denial of this benefit by the lower authorities was contrary to the statutory scheme and previous Tribunal rulings.

Treatment of Competing Arguments: The department initially reiterated the findings of the impugned order but conceded that the issue was squarely covered by the Tribunal's earlier decision in Sahara Ex-Servicemen Welfare Co-Operative Society Limited. Thus, no substantial counter-argument was advanced against the appellant's entitlement.

Conclusions: The Tribunal held that the appellant was eligible for the abatement under Notification No. 30/2012-ST and that the demand of the remaining 75% of service tax was unsustainable.

Issue (b): Invocation of Extended Period of Limitation

Relevant Legal Framework and Precedents: Under the Finance Act, 1994, extended period of limitation can be invoked where there is suppression of facts or intent to evade payment of service tax. The show cause notice alleged suppression by the appellant to justify demand beyond the normal limitation period.

Court's Interpretation and Reasoning: The Tribunal reasoned that since the appellant was entitled to the abatement and had paid service tax on 25% of the taxable value, the allegation of suppression or evasion was unfounded. The appellant's conduct did not warrant invocation of the extended period of limitation.

Key Evidence and Findings: There was no evidence of suppression or evasion. The appellant had complied with the payment of tax on the 25% portion as per the notification.

Application of Law to Facts: Given that the appellant was not liable for the 75% portion of the tax, the extended period could not be invoked to demand tax on that portion.

Treatment of Competing Arguments: The department's contention on suppression was rejected in light of the appellant's eligibility and compliance.

Conclusions: The Tribunal held that the extended period of limitation was wrongly invoked and the demand on this ground was not sustainable.

Issue (c): Confirmation of Demand, Interest, and Penalty

Relevant Legal Framework and Precedents: The demand of service tax, interest, and penalty under section 78 of the Finance Act, 1994, depends on the correctness of the tax demand and the existence of any evasion or suppression.

Court's Interpretation and Reasoning: Since the Tribunal found that the appellant was entitled to the abatement and had not evaded tax, the demand, interest, and penalty confirmed by the Commissioner (Appeals) were unsustainable.

Key Evidence and Findings: The appellant had paid tax on 25% of the taxable value, and the service receivers had paid the rest. No evasion was established.

Application of Law to Facts: The penalty and interest could not be imposed where the tax demand itself was not justified.

Treatment of Competing Arguments: The department's arguments were not supported by evidence and were contradicted by the Tribunal's earlier ruling.

Conclusions: The Tribunal set aside the demand, interest, and penalty confirmed against the appellant.

3. SIGNIFICANT HOLDINGS

The Tribunal's crucial legal reasoning is encapsulated in the following verbatim excerpt from its earlier ruling, which was applied to the present case:

"The appellant being a co-operative society was very much eligible for the abatement/exemption of 75% of the tax liability. The Order-in-Original has denied the said exemption holding the appellant is not the 'Association of Person'. To our understanding the said comparison is not required for the purpose of the impugned notification. It is an admitted fact that 25% of tax liability has been discharged by the appellant. In light of this discussion the confirmation of remaining 75% of the gross value as service tax from appellant is not sustainable."

Furthermore, on the issue of limitation, the Tribunal held:

"From the above discussion, it has been already held that appellant was not liable to the tax as has been proposed by the impugned show cause notice and has been confirmed by the impugned order. Hence, the question of evasion of tax becomes redundant. Also no question arises with the appellant to have an intent to evade the same. Accordingly, we hold that the extended period has wrongly been invoked."

Core principles established include:

- A co-operative society registered under law qualifies as an "association of persons" for the purpose of Notification No. 30/2012-ST and is entitled to the 75% abatement on taxable value for security agency services provided to a body corporate.

- Payment of service tax on 25% of the taxable value by the service provider and 75% by the service receiver is the correct application of the notification.

- Invocation of the extended period of limitation requires proof of suppression or intent to evade tax, which is absent where the appellant complies with the notification.

- Demand, interest, and penalty cannot be sustained where the foundational tax demand is not legally tenable.

Final determinations on each issue were in favor of the appellant, resulting in the setting aside of the impugned order and allowing the appeal.