2011 (5) TMI 174 - AT - Service Tax

Appellant liable for service tax under amended definition. Tribunal orders pre-deposit. Financial hardship claim dismissed.

The Tribunal concluded that the appellant was liable to pay service tax under the amended definition of 'Security Agency' service. It directed the ... 'Security Agency' service as per amended definition - 'Manpower Recruitment Agency' service - effect of substitution of 'person' for 'commercial concern' in a taxable service definition - statutory/sovereign function does not ipso facto exclude levy of service tax - pre-deposit under section 35F of the Central Excise Act read with section 83 of the Finance Act, 1994'Security Agency' service as per amended definition - effect of substitution of 'person' for 'commercial concern' in a taxable service definition - statutory/sovereign function does not ipso facto exclude levy of service tax - Appellant falls within the amended definition of 'Security Agency' and is prima facie liable to pay service tax on amounts collected from registered establishments for deployment of security guards. - HELD THAT: - The Tribunal held that the amended definition of 'security agency'-which substitutes the word 'person' for 'commercial concern'-brings within its ambit any juristic person engaged in the business of rendering services relating to security of property or persons. The Board, a statutory/juristic person empowered to implement the welfare scheme, collected monthly remittances from principal employers for disbursement of wages/allowances to deployed security guards and levied a fee to defray scheme implementation costs. Those remittances prima facie constituted consideration for services of providing security personnel and therefore, on the facts as presented, attract service tax under the head 'Security Agency' notwithstanding that the Board also performs statutory/sovereign functions. The Tribunal distinguished prior orders and High Court decisions which addressed different statutory contexts or the pre-amendment definition that retained a commercial element, and noted subsequent CBEC guidance treating similar statutory providers as service providers for security services. [Paras 11, 12]Appellant prima facie liable to pay service tax as a 'security agency' for the period in dispute; pre-deposit directed in relation to the taxable value attributable to this head.'Manpower Recruitment Agency' service - Demand of service tax under the head 'Manpower Recruitment Agency' service is not sustained on the record and the impugned order is ambiguous as to any taxable value attributable to this head. - HELD THAT: - The Tribunal found no material in the show-cause notice, impugned order, or submissions to indicate that the Board rendered 'Manpower Recruitment Agency' service or collected consideration for such service during the period in question. The Commissioner's gross taxable value lacked any breakup allocating amounts to 'Manpower Recruitment Agency' service; the annexure only reflected amounts under scheme levy and wages/allowances. Given this absence and resulting ambiguity, the Tribunal declined to uphold the demand under this head for the present proceedings and excluded the levy element from the pre-deposit direction. [Paras 14]Demand under 'Manpower Recruitment Agency' service not sustained on the record; no pre-deposit directed for that head.Final Conclusion: For the period May 2006 to March 2007 the Tribunal held that the appellant prima facie falls within the amended definition of 'Security Agency' and is liable to service tax on amounts collected from registered establishments for providing security personnel, but the demand under 'Manpower Recruitment Agency' service is not supported on the record; the appellant was directed to make a 50% pre-deposit of the tax determined to be attributable to the security-agency component within six weeks. Issues Involved:1. Waiver of pre-deposit and stay of recovery of service tax.2. Classification of the appellant's activities under 'Security Agency' service and 'Manpower Recruitment Agency' service.3. Applicability of service tax to the appellant as a statutory body.4. Financial hardship claim by the appellant.Detailed Analysis:1. Waiver of Pre-deposit and Stay of Recovery of Service Tax:The appellant sought waiver of pre-deposit and stay of recovery for a service tax demand of Rs. 12,90,54,553 and associated penalties under sections 77 and 78 of the Finance Act, 1994. The demand pertained to the period from May 2006 to March 2007 under 'Security Agency' service and 'Manpower Recruitment Agency' service.2. Classification of the Appellant's Activities:The appellant, a Security Guards Board constituted under the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981, argued that it was not a 'commercial concern' and thus not liable for service tax under 'Security Agency' service. The Board's activities were claimed to be sovereign functions aimed at implementing welfare measures for security guards, not commercial services.The respondent countered that the definition of 'Security Agency' had been amended effective from May 1, 2006, replacing 'commercial concern' with 'person,' thus broadening the scope to include statutory bodies like the appellant. The Tribunal agreed with this interpretation, noting that the Board's activities fit within the amended definition of 'Security Agency' as they involved providing security personnel to registered establishments.3. Applicability of Service Tax to the Appellant as a Statutory Body:The appellant relied on previous decisions and a circular (Circular No. 89/7/2006-S.T.) clarifying that statutory functions performed by public authorities were not taxable services. However, the Tribunal distinguished these precedents, noting that the amendment to the definition of 'Security Agency' removed the commercial element, making the appellant liable for service tax.The Tribunal also considered CBEC instructions (F.No. 345/1/2007-TRU) regarding the Central Industrial Security Force (CISF), which, despite being a statutory body, was required to pay service tax for providing security services. The Tribunal found this analogous to the appellant's situation.4. Financial Hardship Claim by the Appellant:The appellant claimed financial hardship, arguing it had no funds for pre-deposit. However, the Tribunal found no substantial evidence to support this claim. Consequently, the Tribunal directed the appellant to pre-deposit 50% of the service tax amounting to Rs. 9,76,97,740, given the statutory nature of the appellant's functions.Conclusion:The Tribunal concluded that the appellant was liable to pay service tax under the amended definition of 'Security Agency' service. It directed the appellant to pre-deposit 50% of the determined tax amount within six weeks, dismissing the claim of financial hardship due to lack of evidence. The Tribunal also noted ambiguity in the demand related to 'Manpower Recruitment Agency' service but did not find sufficient grounds to exclude the entire demand.