Case Law Details
Bhootpurva Sainik Kalyan Sangh Vs Commissioner of Central Excise & Service Tax (CESTAT Kolkata)
The CESTAT, Kolkata in M/s. Bhootpurva Sainik Kalyan Sangh v. Commissioner of Central Excise & Service Tax [Service Tax Appeal No.566 of 2011 dated May 11,2023] held that, there should be mens rea to evade payment of service tax for demand of service tax and penalty beyond period of limitation.
Facts:
M/s. Bhootpurva Sainik Kalyan Sangh (“the Appellant”) a Welfare and Rehabilitation Organization of Ex-Servicemen providing Security Agency Service mainly to Govt. departments/Public Sector Undertakings. The Appellant has taken service tax registration and paying service tax on the service charges received but did not include the wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance, etc., in the taxable value for the purpose of payment of service tax.
A show cause notice demanding Service tax of Rs.6,83,312, including interest, penalty equal to the service tax under section 78 of the Finance Act 1994 was issued for the period from April 2004 to March 2006 dated January 9, 2009 (“the SCN”). Subsequently, the demand raised in the SCN was confirmed by the Adjudicating Authority vide Order-in-Original dated March 23, 2010 (“the OIO”).
Aggrieved by the OIO, the Appellant filed an appeal before the Commissioner (Appeals), who upheld the demand confirmed vide the OIO (“the Impugned Order”).
Aggrieved by the Impugned order, the Appellant filed an appeal before the CESTAT, Kolkata and contended that the Appellant was not a commercial concern and during the relevant period i.e., prior to June 16, 2005, Service Tax was payable only by a commercial concern rendering Security Agency Service and also stated that they were not aware that the reimbursement charges such as wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance were to be included in the taxable value for the purpose of payment of service tax and was also regularly filing Service Tax returns during the period April 2004 to March 2006 and intimating the gross value on which they have paid Service Tax vide ST-3 returns were regularly filed by them.
Issue:
Whether the Appellant was liable to pay service tax on wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance, etc., and whether the notice issued by the department invoking the extended period of limitation is valid?
Held:
The CESTAT, Kolkata in [Service Tax Appeal No.566 of 2011] held as under:
The Appellant has not disputed the liability of payment of service tax for the security agency service rendered by them to their customers and regularly filing Service Tax returns during the period April 2004 to March 2006 and intimating the gross value on which they have paid Service Tax. Thus, the Appellant has not suppressed any information from the department and declared the taxable value in the ST-3 returns filed by them.
Held that, there is no evidence brought on record to substantiate the claim that the Appellant has suppressed the taxable value from the department as there should be mens rea to evade payment of service tax, therefore, the SCN issued on October 9, 2009 for an extended period is not valid.
Hence, the demand of service tax and interest confirmed, and the penalty imposed under section 78 of the Finance Act 1994, in the impugned order cannot be upheld due to ground of limitation.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Appellants are a Welfare and Rehabilitation Organization of Ex-Servicemen providing Security Agency Service mainly to Govt. departments/Public Sector Undertakings. They have taken service tax registration and paying service tax on the service charges received by them. They were not including the wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance etc in the taxable value for the purpose of payment of service tax. Accordingly, a show cause notice dated 09/01/2009 was issued to the Appellant demanding Service tax of Rs.6,83,312, including cess, for the period from April 2004 to March 2006. The said show cause notice was adjudicated by the Adjudicating authority and the demand raised in the notice was confirmed vide Order-in-Original dated 23/03/2010.He also demanded interest and imposed penalty equal to the duty under section 78 of the Finance Act 1994. The Appellant filed appeal before the Commissioner(Appeals), who upheld the demand confirmed in the Order-in-Original. The Appellant is before us against the impugned order passed by the Commissioner(Appeals).
2. In their submissions, the Appellant stated that they are not a commercial concern and during the relevant period i.e., prior to 16/06/2005, Service Tax was payable only by a commercial concern rendering Security Agency Service. Since they were not a commercial concern , no service tax was payable by them for the period prior to 16/06/2005. Regarding the taxable value on which service tax was to be paid, he stated that they were not aware that the reimbursement charges such as wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance were to be included in the taxable value for the purpose of payment of service tax. They have paid service tax regularly on the service charges received from their customers and filed ST-3 returns. Accordingly, he argued that the notice issued on 09.10.2009 byinvoking the extended period of limitation is not sustainable as there was no suppression of fact involved in this case. They have not suppressed any information from the department. In the ST-3 returns filed by them they have clearly indicated the value on which service tax was paid by them. In view of the above he argued that the impugned
order is not sustainable on the ground of ‘Limitation’.
3. The Ld.Authorized Representative reiterated the findings of the Adjudicating Authority in the Order-in-Original and the Commissioner(Appeals) in the impugned order.
4. Heard both sides and perused the appeal records.
5. We find that the Appellant has provided Security Agency Service to Government and Public Sector Undertakings and paid Service Tax on the service charges collected by them from the customers. However, they have not included the wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance etc. to arrive at the taxable value as they have
considered these receipts as re-imbursible expenses which are not includible in the gross value for the purpose of payment of Service Tax.
6. We observe that the Appellant has not disputed the liability of payment of service tax for the security agency service rendered by them to their customers. They were regularly filing Service Tax returns during the period April 2004 to March 2006 and intimating the gross value on which they have paid Service Tax. Thus, we observe that the
Appellant has not suppressed any information from the department and declared the taxable value in the ST-3 returns filed by them. Hence, it cannot be alleged that they have suppressed the information from the department with an intention to evade payment of service tax. From the impugned order we find that there is no evidence brought on record to substantiate the claim in the notice that the Appellant has suppressed the taxable value from the department. Thus, we observe that there is no mens rea to evade payment of Service Tax in this case. Accordingly, we observe that Show Cause Notice issued on 09.10.2009 by invoking extended period of limitation is not sustainable. Hence, the demand of service tax and interest confirmed and the penalty imposed under section 78 of the Finance Act 1994, in the impugned order, are not sustainable on the ground of limitation.
7. In view of the above we allow the Appeal filed by the Appellant.
(Dictated and pronounced in the open Court.)
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