CESTAT Upholds Service Tax on Gross Amount for Security Agency; Penalties Reduced

The Appellate Tribunal CESTAT, Kolkata upheld the demand of Service Tax on the gross amount received by the security agency, rejecting the contention that tax should only be paid on the service charge. The penalties imposed under Sections 76 and 77 of the Finance Act, 1994 were reduced to a composite penalty of Rs. 50,000.00 considering the Appellants' regular payment of Service Tax on service charges. The Appeal was disposed of with these terms set by the Tribunal.

---

---

Issues: Valuation of security service for Service Tax payment; Imposition of penalties under Sections 76 and 77 of the Finance Act, 1994

In the judgment by the Appellate Tribunal CESTAT, Kolkata, the Appellants appealed against an Order confirming a demand of Service Tax of Rs.10,39,910.00 under Section 73 of the Finance Act, 1994, as providers of security service, with penalties imposed under Sections 76 and 77 of the Act. The Appellants argued that they should only pay Service Tax on the service charge of 15% they received. However, the Revenue contended that Service Tax should be paid on the gross amount received by the security agency. The Tribunal referred to previous decisions like New Industrial Security Force Vs. CCE, Kanpur and Panther Detective Services Vs. CCEx., Kanpur, where it was held that the gross amount charged by the security agency is taxable for Service Tax purposes. Therefore, the demand of Service Tax based on the gross amount received by the Appellants was upheld.

Regarding the penalties imposed under Sections 76 and 77 of the Finance Act, 1994, the Appellants argued that they should not be liable for penalties as they were filing returns showing payment of Service Tax on the service charges. They cited Section 80 of the Act, which states that no penalty shall be imposable if the assessee proves there was a reasonable cause for the failure. The Tribunal considered the circumstances, noting that the Appellants were paying Service Tax on the service charges. As a result, a composite penalty of Rs. 50,000.00 was deemed appropriate to meet the ends of justice. Consequently, the Appeal was disposed of with the above terms set by the Tribunal.

---