Case Law Details
Commissioner of Central Excise & ST Vs Central Industrial Security Force (CESTAT Ahmedabad)
Introduction: In a recent case before the CESTAT Ahmedabad, the question of the levy of service tax on security services provided by the Central Industrial Security Force (CISF) came into focus. The central issue revolved around whether CISF, as a government agency, was liable to pay service tax on its security services. The Adjudicating Authority had initially proposed a penalty under Section 78 of the Finance Act, 1994. However, the CESTAT Ahmedabad ultimately quashed the penalty, citing a lack of clarity on the matter.
The Revenue’s Appeal: The case began with the Revenue filing an appeal for the imposition of a penalty under Section 78. The learned Deputy Commissioner (AR) representing the Revenue argued that since the demand for service tax had been accepted by the respondent (CISF) and the case had been settled under SVLDRS-2019, penalty under Section 78 should have been imposed by the Adjudicating Authority.
Lack of Clarity on Service Tax Liability: The crux of the matter was the lack of clarity regarding the leviability of service tax on the security services provided by CISF. This uncertainty stemmed from the fact that CISF is a government agency, and its services were rendered to public sector undertakings (PSUs) in which the government had a stake. The Adjudicating Authority took note of this lack of clarity and concluded that there was no mens rea (guilty intent) on the part of CISF to evade payment of duty. As a result, the proposal for a penalty under Section 78 was dropped.
CESTAT’s Decision: The CESTAT Ahmedabad concurred with the Adjudicating Authority’s decision. It noted that due to the uncertainty surrounding the leviability of service tax on security services provided by CISF, there was no mens rea on the part of CISF to evade duty. The case fell under Section 80 of the Finance Act, 1994, which provides relief in cases where there is no mens rea. Therefore, the CESTAT upheld the Adjudicating Authority’s decision to drop the penalty proposal, and the Revenue’s appeal was dismissed.
Conclusion: The CESTAT Ahmedabad’s ruling in this case highlights the importance of clarity in tax liability matters. Due to the lack of clarity regarding the service tax liability of CISF’s security services, the imposition of a penalty under Section 78 was deemed unwarranted. This case serves as a reminder that tax liability should be determined with precision, and penalties should only be imposed when there is evidence of willful evasion.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The Revenue filed the present appeal for imposition of penalty under Section 78 which was not imposed by the learned Adjudicating Authority.
2. Shri Tara Prakash, learned Deputy Commissioner (AR) appearing on behalf of the Revenue reiterates the grounds of appeal. He submits that as the demand of service tax has been accepted by the respondent and the case has been settled under SVLDRS-2019. Accordingly, the Tribunal vide order No. A/11451/2021 dated 01.04.2021 disposed the appeal as deemed withdrawn. It is his submission that since the demand has been accepted by the respondent and the extended period is involved, penalty under Section 78 was supposed to be imposed by the Adjudicating Authority.
3. None appearing on behalf of the respondent-assessee.
4. On careful consideration of the submissions made by learned AR and perusal of record, we find that Adjudicating Authority while dropping the proposal for penalty under Section 78 of the Finance Act, 1994 given the following findings:-
“17. Regarding the proposal of penalty on CISF, as is evident from the Ad hoc exemption, there was lack of clarity about the leviability of Service tax on the Security Services provided by CISF for the reason that CISF is a Govt. Agency and also because the recipient being PSUs in which Govt. has a stake. I therefore find no mens rea on the part of CISF to evade payment of duty. I therefore propose no penalty against CISF.”
5. We do agree with the learned Commissioner that since there was lack of clarity about the leviability of service tax on security services provided by Central Industrial Security Force as part of the Government of India under Ministry of Home Affairs, there was no mens-rea on the part of the Central Industrial Security Force and therefore, this case is covered under Section 80 of the Finance Act, 1994. Accordingly, invoking the said proviso, we are of the view that the learned Commissioner has rightly dripped the proposal to impose penalty under Section 78. Therefore, we do not find any substance in the appeal filed by the Revenue. Accordingly, the impugned order is upheld and the Revenue’s appeal is dismissed.
(Pronounced in the open court on 05.09.2023)
