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.
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