Tribunal upholds extended period demand & penalty for service tax, rejects reduced penalty claim

The tribunal dismissed both the Assessee's and Revenue's appeals, upholding the demand for the extended period and penalty under Section 78. It affirmed the availability of the 25% reduced penalty benefit, emphasizing that the gross amount charged for services is liable to service tax, rejecting the appellant's contention that only the commission amount is taxable. The tribunal found the appellant's belief not bona fide, leading to the maintenance of penalties.

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Issues:
Interpretation of service tax liability on gross amount vs. commission only, applicability of extended period for demand, validity of penalty under Section 78, availability of 25% reduced penalty benefit.

Interpretation of Service Tax Liability:
The appellant provided security services and paid service tax only on the commission amount, excluding salary of security guards, PF, ESI. The department contended that service tax should be paid on the gross amount, including these expenses. The tribunal held that as per Section 67, the gross amount charged for services is liable to service tax. The salary, PF, ESI are not reimbursable expenditures and cannot be deducted from the gross value. Therefore, the tribunal disagreed with the appellant's contention that only the commission amount is taxable.

Applicability of Extended Period for Demand:
The appellant had been paying service tax only on the commission amount without including the salary of guards, PF, ESI. The tribunal noted that there was no ambiguity in the provisions regarding the value on which service tax should be charged for security services. It held that the appellant's belief that only commission was taxable was not bona fide. Therefore, the tribunal upheld the demand for the extended period.

Validity of Penalty under Section 78:
Since the appellant did not pay service tax on the correct value of security services despite clear provisions, the tribunal found that their actions were not bona fide. Consequently, the penalty imposed under Section 78 was maintained.

Availability of 25% Reduced Penalty Benefit:
The Revenue contested the benefit of a 25% reduced penalty granted by the Commissioner (Appeals). The tribunal observed that as per a Supreme Court decision, the option of a reduced penalty should be explicitly given in writing by the Adjudicating Authority. Since this was not done in the present case, the Commissioner (Appeals) was correct in extending the benefit of the reduced penalty. Therefore, the Revenue's appeal against the reduced penalty was dismissed.

In conclusion, both the Assessee's appeal and the Revenue's appeal were dismissed, with the tribunal upholding the demand for the extended period and the penalty under Section 78, while affirming the availability of the 25% reduced penalty benefit.

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