Service Tax Demand and Penalty u/s 78 of Finance Act not valid in Absence of Corroborative Evidence: CESTAT

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The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax demand and penalty under section 78 of the Finance Act is not valid in the absence of corroborative evidence.

M/s.Bhootpurva Sainik Kalyan Sangh, the Appellants are a Welfare and Rehabilitation Organization of Ex-Servicemen providing Security Agency Services mainly to Govt. departments/Public Sector Undertakings. They have taken service tax registration and paid service tax on the service charges received by them. They did not include the wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance etc in the taxable value for payment of service tax.

 Ashow cause notice was issued to the Appellant demanding a Service tax of Rs.6,83,312, including cess, for the periodfrom April 2004 to March 2006. The said show cause notice was adjudicated by the authority and the demand raised in the notice was confirmed vide Order-in-Original.

He also demanded interest and imposed a penalty equal to the duty under section 78 of the Finance Act 1994. The Appellant filed an appeal before the Commissioner(Appeals), who upheld the demand confirmed in the Order-in-Original.

The Appellant stated that they are not a commercial concern and during the relevant period i.e., before 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 before 16/06/2005.

It was stated that they were not aware that the reimbursement charges such as wages, EPF, ESI, Bonus, Gratuity, and House Rent Allowance were to be included in the taxable value for payment of service tax. They have paid service tax regularly on the service charges received from their customers and filed ST-3 returns.

It was found 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.

A two-member bench of Shri P K Choudhary, (Judicial) and Shri K Anpazhakan, (Technical) observed that the Appellant has not suppressed any information from the department and declared the taxable value in the ST-3 returns filed by them.

It was viewed that Show Cause Notice issued on 09.10.2009 by invoking an extended period of limitation is not sustainable. Further held that “the demand of service tax and interest confirmed and the penalty imposed under section 78 of the Finance Act 1994, in the impugned order, is not sustainable on the ground of limitation. “To Read the full text of the Order CLICK HERE

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Bhootpurva Sainik Kalyan Sangh vs Commissioner of Central Excise & Service Tax


Counsel for Appellant:   Shri Anirudha Singh

Counsel for Respondent:   Shri J.Chattopadhyay

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