2008 (9) TMI 122 - AT - Service Tax

Tribunal rules in favor of Appellants, absolving them of service tax liability

INVINCIBLE SECURITY SERVICES Versus COMMISSIONER OF C. EX., NOIDA

The Tribunal ruled in favor of the Appellants, stating that they were not liable for the payment of service tax as BSNL had already paid the tax and ... Security Services provided to BSNL (PSU) - agreement reveals that service tax will be paid by BSNL – appellant submits that they have also paid the interest for delay in payment of tax by BSNL – BSNL is registered with the Department and filed the return and deposited the tax with the Commissionerate which has been accepted by them – therefore, demand raised by revenue contending that liability of appellant cannot be discharged by the client, is not sustainable Issues:1. Liability of payment of service tax by the Appellants for security services provided to Bharat Sanchar Nigam Ltd. (BSNL).2. Imposition of penalties and interest on the Appellants for non-payment of service tax.Analysis:1. The Appellants, engaged in providing security services, had an agreement with BSNL where BSNL agreed to pay the service tax. The Commissioner (Appeals) confirmed the demand of tax and imposed penalties, which were later reduced to 50% of the tax amount. However, it was undisputed that BSNL had paid the tax and filed returns for the services provided by the Appellants.2. The Tribunal noted that BSNL, a Government of India Undertaking, had indeed paid the tax and interest for any delay in payment. The Appellants, being a small organization, had fulfilled their obligations as per the agreement. The Tribunal emphasized that the tax liability cannot be imposed on the Appellants when BSNL had already discharged it. The Appellants had also paid interest for any delay by BSNL in tax payment.3. Despite the argument by the Departmental Representative (DR) that the Appellants could not be absolved of tax liability, the Tribunal found that BSNL's registration with the Central Excise Department, filing of returns, and tax deposit with the Moradabad Commissionerate were all in order. Therefore, the contention that the Appellants were liable for the tax was deemed unsustainable. The Tribunal set aside the demand of tax and penalties, allowing the appeals with consequential relief.This judgment clarifies the principle that when a third party, such as BSNL in this case, has already paid the service tax as per the agreement, the primary service provider (Appellants) cannot be held liable for the same. The Tribunal's decision was based on the factual findings that BSNL had fulfilled its tax obligations, thereby absolving the Appellants from any further tax liability.