Tribunal rules ex-servicemen's cooperative not liable for service tax pre-2006, liable thereafter

The Tribunal ruled in favor of the appellant, a cooperative society of ex-servicemen providing security services, regarding the liability for service tax. They were found not liable for service tax before 18.04.06 but liable from that date onwards due to a change in the definition of security agency services. The penalty imposed on the appellant was set aside as it was deemed that their belief in being exempt from service tax was bona fide. The case was remanded for re-quantification of the demand for the specified period.

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Issues:
1. Whether the appellant, a cooperative society of ex-servicemen providing security services, is liable to pay service tax for the period prior to 18.04.06.
2. Whether the appellant is liable to pay service tax from 18.04.06 onwards.
3. Whether the penalty imposed on the appellant is justified.

Analysis:
1. The appellant, a cooperative society of ex-servicemen providing security services, contested a demand for service tax for the period April 2003 to April 2006. The issue revolved around whether the appellant falls under the definition of 'Security Agency Services' under section 65(94) of the Finance Act, 1994. The Tribunal referred to a previous decision and held that prior to 18.04.06, the definition of security agency was in relation to a commercial concern engaged in the business of providing services. As the appellant is a cooperative society, they were not considered a commercial concern and, therefore, not liable for service tax before 18.04.06. However, the definition was amended post 18.04.06 to include 'any person' engaged in providing security services. The appellant, post this amendment, was found liable for service tax from 18.04.06 onwards.

2. The Tribunal acknowledged that the appellant is liable to pay service tax from 18.04.06 onwards due to the change in the definition of security agency. The lower adjudicating authority was directed to quantify the same. However, considering that the appellant's liability arose due to a change in the law, and not out of mala fide intentions, the penalty imposed on the appellant was set aside. The Tribunal found that the penalty was not justified as the appellant's belief that being a cooperative society exempted them from service tax was held to be bona fide. The appeal was remanded for re-quantification of the demand for the specified period.

3. In conclusion, the Tribunal ruled in favor of the appellant regarding the liability for service tax, distinguishing the periods before and after the amendment in the definition of security agency services. The penalty imposed on the appellant was set aside due to the absence of mala fide intent, and the case was remanded for re-quantification of the demand.

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