1. The appellant, M/s. Jwalla Security Force, assails order-in-appeal No. NGP/EXCUS/000/APP/073/14-15 dated 22nd July 2014 of Commissioner of Customs & Central Excise (Appeals), Nagpur that held the entire receipts to be liable to tax as gross value of service for the period from 2006-07 to 2010-11, with the period from April 2006 to September 2006 being barred by limitation, with cum-tax benefit and with the demand in relation to services provided to special economic zone units being set aside while upholding the penalty under section 78 of Finance Act, 1994. Consequently, the order of the original authority crystallising tax liability of Rs. 26,22,867 as provider of security agency service was modified to the extent of exclusions.
2. During the proceeding before the lower authorities, the appellant had admitted that statutory payments had not been included for taxable value. Likewise, the expenses incurred on rent of office, salary to staff, charges toward electricity, stationery, courier, travel and uniforms had also been excluded for the same reason. It would appear that the charges from customers were billed on the basis of number of guards supplied per month. The agreements entered into with the recipients of service were also furnished to the lower authorities. It was also their submission that the rates of service tax for 2006-07 had been computed as 12.24% instead of 10.2% for some months. It is also contended that Rs. 5,63,713 was received from a unit in a special economic zone and was required to be excluded.
3. The issue for determination is the scope for inclusion of expenses that are claimed to be reimbursable in the gross value of taxable service. It is the claim of the appellant that they had been paying service tax on receipts after deduction of these reimbursable expenses and had been filing returns regularly.
4. Relying upon the decision of the Hon'ble High Court of Delhi in Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India [2013 (29) STR 9 (Del)] it is contended that reimbursements are not liable to tax in the absence of a specific provision in section 67 of Finance Act, 1994. The amendment in Explanation to section 67 by Finance Act, 2015 to broaden the definition of consideration is pointed out on behalf of the appellant to justify the claim that these were specifically excluded from the computation of taxable service until then. It is also contended that the extended period is not invocable in view of the decision of Tribunal in Gujarat Intelligence Security v. Commissioner of Central Excise, Vadodara [2010-TIOL-CESTAT-AHM], Malabar Management Services Pvt. Ltd. v. Commissioner of Service Tax, Chennai [2007-TIOL-1949-CESTAT- MAD], and S Jayashree v. Commissioner of Central Excise, Mangalore [2007-TIOL-486-CESTAT-BANG].
5. It would appear from the records that, with the modification ordered by the first appellate authority, the demand was reduced to Rs. 17,87,548. The taxable service in section 65 (105) (w) of Finance Act, 1994 is any service provided or to be provided to any person by a security agency in relation to security of any property or person, by providing security personnel or otherwise and includes the provision of services of investigation, detection or verification of any fact or activity Security agency in section 65(94) of Finance Act, 1994 is defined as security agency means any person engaged in the business of rendering services relating to the security of any property, whether movable or immovable or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel.
It is the contention of the appellant that they are, in fact, suppliers of manpower and are correct in limiting the value of taxable service by excluding wages and salaries paid to personnel.
6. On a close reading of the nature of the taxable service, as well as the definitions extracted supra, it would appear that the consideration that is intended to be taxed is the totality of that which is receivable by the service provider from the service recipient. Undoubtedly, the contract between the appellant and some of its customers is for supply of personnel; however, it cannot be said that the personnel are placed at the disposal of the customers. The service provider is fully responsible for the establishment, administration, upkeep and operation of the security services required by the customers. It would therefore not be possible to draw a distinction between the portion of the consideration that does not relate to these activities. In consequence, the tax liability crystallises on the gross value services subject to the various deductions permitted by the first appellate authority.
7. We take note that the appellant has discharged the tax liability alongwith interest. It is also not in dispute that the issue of the gro
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ss value of taxable service had been subject to challenge on various occasions with differing interpretations being placed upon the inclusions and exclusions thereon. In those circumstances, it would not be appropriate to saddle the non-payment of tax or short-payment of tax with the motive of deliberate evasion of tax. Considering all these aspects, we consider it appropriate to invoke the provisions of section 80 of Finance Act, 1994 and set aside the penalty that have been imposed on the appellant. The impugned order is modified to this extent.