Free accommodation provided to security staff cannot be included in gross value for service tax under Section 67

CESTAT Ahmedabad held that accommodation provided by service recipient to security staff cannot be included in gross value of security service for taxation purposes. Following precedent from CESTAT New Delhi, the tribunal ruled that without evidence of HRA payment or monetary consideration, notional value of free accommodation cannot form part of taxable gross value under Section 67. The impugned order was set aside and appeal allowed, confirming accommodation benefits do not constitute taxable consideration for security services.

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Issues Involved:
1. Whether the housing/accommodation facility provided by the appellant to CISF personnel should be included in the gross value of security service for service tax purposes.
2. Whether the extended period of limitation for issuing the show cause notice is applicable.

Detailed Analysis:

1. Housing/Accommodation Facility as Part of Gross Value of Security Service:
The central issue in this case is whether the housing/accommodation facility provided by the appellant to CISF personnel should be considered as additional consideration and included in the gross value of the security service for the purpose of levying service tax.

The appellant argued that the issue is well-settled by various judgments, where it has been held that certain amenities provided by the service recipient to the security service provider should not form part of the security service. The appellant cited several judgments to support their argument, including:
- CGST vs. Commandant CISF Unit - 2019 (2) TMI 1175 - CESTAT New Delhi
- SR Commandant Central Industrial Security Force vs. CC - 2023 (4) TMI 872 - CESTAT New Delhi
- Bharat Coking Coal Ltd vs. CCE - 2021 (9) TMI 23 - CESTAT Kolkata
- NTPC Ltd vs. CCE - 2024 (5) TMI 816 - CESTAT
- CCE vs. Commandant Central Industrial Security Force - 2024 (6) TMI 910-CESTAT

The Tribunal reviewed these judgments and found that the accommodation provided by the service recipient to the security staff should not be included in the gross value of the security service. Specifically, in the case of CGST vs. Commandant CISF Unit - 2019 (2) TMI 1175 - CESTAT New Delhi, the Tribunal concluded that the free accommodation provided to CISF personnel does not constitute consideration that should be included in the gross value for service tax purposes. This decision was based on a joint reading of Section 67 of the Finance Act and Rule 3 of the Determination of Value Rules, which clarified that service tax is chargeable on the value of the service provided and not on notional values of free accommodation.

Similarly, in SR Commandant Central Industrial Security Force vs. CC - 2023 (4) TMI 872 - CESTAT New Delhi, the Tribunal held that non-monetary considerations such as free accommodation, medical facilities, and other amenities should not be included in the taxable value. The Tribunal emphasized that there was no evidence to suggest that any amount in terms of HRA was paid to CISF, thereby excluding the notional value of free accommodation from the gross value.

2. Applicability of Extended Period of Limitation:
The second issue pertains to whether the extended period of limitation for issuing the show cause notice is applicable in this case.

The Tribunal observed that the show cause notice was issued beyond the normal period of one year, invoking the extended period of limitation under the proviso to Section 73 of the Finance Act, 1994. The Tribunal noted that both the service provider (CISF) and the service recipient (appellant) are government or public sector undertakings, and there was no intent to evade tax. The Tribunal found no evidence of fraud, suppression, or misrepresentation of facts by the service provider, which would justify invoking the extended period of limitation.

In the case of CGST vs. Commandant CISF Unit - 2019 (2) TMI 1175 - CESTAT New Delhi, it was concluded that the show cause notice was issued based on a notional presumption and not on any concrete evidence of evasion, thereby making the notice hit by the principle of limitation.

Conclusion:
In light of the above judgments and analysis, the Tribunal concluded that the housing/accommodation facility provided by the appellant to CISF personnel should not be included in the gross value of the security service for the purpose of levying service tax. Additionally, the extended period of limitation was not applicable in this case due to the absence of any intent to evade tax or any evidence of fraud or suppression. Consequently, the impugned order was set aside, and the appeal was allowed.

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