2018 (9) TMI 1374 - AT - Service Tax

Appellant's Liability Upheld for Service Value Suppression, Misclassification Overturned

The Tribunal upheld the appellant's liability for suppressing the value of Security Agency Services but set aside the demand and penalty for ... Security Agency Services - it was alleged that there was suppression of value of the said services provided by them to their various clients, resulting in evasion of service tax - Held that:- Once the personnels are supplied by the appellant to their clients, the utilization of their services as security persons or otherwise will not turn the service provided by the appellant into the security agency services. Not only that, the service recipient have also clarified that the mention of the same as security services in their ledgers is out of ignorance on the part of the person responsible for maintaining such records. The appellant have accepted their liability to the extent of ₹ 3.10 lakhs which is on account of suppression of the value of Security Agency Service. As such, the confirmation of the same along with imposition of penalty of identical amount is upheld - balance amount confirmed is set aside - appeal allowed in part. Issues:1. Whether the appellant suppressed the value of services provided, resulting in evasion of service tax.2. Whether the services provided by the appellant fall under the category of 'Security Agency Services' or 'Man Power Supply Service.'3. Whether the demand for service tax liability prior to 16.06.2005 is valid.Analysis:1. The appellant was registered with the Service Tax Department for providing 'Security Agency Services.' Proceedings were initiated against them for allegedly suppressing the value of services provided, leading to evasion of service tax. The demand was confirmed, and a penalty was imposed. The appellant accepted liability for a portion of the demand related to suppression of value.2. The appellant challenged the remaining demand, arguing that the services provided were actually 'Man Power Supply Service' based on agreements with clients. The Commissioner (Appeals) acknowledged the contracts for Manpower Supply but held that services used as Security Guards constituted Security Agency Services. The appellant contended that the services should be considered as Manpower Supply, supported by certificates from customers and the nature of ledger entries.3. The Tribunal found that the contracts were indeed for the supply of manpower. Even if some personnel were utilized as security personnel by clients, it did not change the nature of the service provided by the appellant. The Tribunal noted that the ledger entries mentioning security services were due to ignorance and that the services should be classified as Manpower Supply, not Security Agency Services. Since the period in question was before the taxable inclusion of Manpower Supply Service, no tax liability arose for the appellant.4. While upholding the appellant's liability for the suppressed value of Security Agency Services, the Tribunal set aside the remaining demand and penalty related to the classification of services. The appeal was allowed in part, with the confirmation of the accepted liability and penalty, and the rejection of the demand for services prior to 16.06.2005.