Co-op society exempt from service tax as non-commercial under Security Agency definition. Tribunal rules in favor.

The cooperative society providing security personnel services to organizations was found not liable for service tax as they were not considered a commercial concern under the amended definition of Security Agency. The Tribunal set aside the service tax demand and penalties under Sections 76, 77, and 78 of the Finance Act, 1994, ruling in favor of the society. The decision granted consequential relief by canceling all penalties imposed, concluding that the society was not liable for service tax during the relevant period.

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Issues:
1. Liability of service tax on Security Agency services provided by a cooperative society.
2. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Liability of service tax on Security Agency services provided by a cooperative society

The case involved a cooperative society registered under the Co-operative Societies Act, 1965, engaged in providing security personnel services to various organizations. The society was approved by Sainik Kalyan Vibhag, Government of Rajasthan, to provide re-employment to ex-servicemen. The society collected minimum wages plus a 5% service charge as per guidelines. A show-cause notice was issued proposing service tax demand on Security Agency Services. The society contended that as they were not a commercial concern providing security services, they should not be liable to pay service tax. The definition of Security Agency was amended with effect from 18.4.2006, including "any person" instead of 'commercial concern'. The society started paying service tax from this date. The Tribunal referred to a previous case involving a society of ex-servicemen providing security services and held that such societies cannot be considered commercial concerns liable for service tax. As the society in the present case was not a commercial concern, they were not liable to pay service tax during the relevant period. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

Issue 2: Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994

The Tribunal confirmed a service tax demand against the appellants for providing Security Agency services and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, since the Tribunal found that the appellants were not liable to pay service tax as they were not a commercial concern engaged in providing security services, the penalties imposed under the said sections were also set aside. The Tribunal's decision to allow the appeal with consequential relief to the appellant encompassed the cancellation of all penalties imposed under the Finance Act, 1994.

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