Service tax on service provided by security agency by placing guards etc in the clients building etc

[shyamal roychowdhury]

My client is a security agency providing security services by placing Guards ets in the clients building, factory gate etc. This is relting fy 2005-06 . ( Does it vary if it is any other F.Y ) The clent here is an 100% E.O.U. They are of opininon that they are covered by circular no 56/05/2003 dated 25/04/2003 .They claimed that in the case of secondery services , the same is merged with the services that are exported & thus notliable for service tax .& hence they didnot pay service tax . and my client also didnot pay tax. Now the dept levied penalty for short payments etc ordering that secondery services like guarding building etc do not merged . Can any one one give some infrmation weather dept is right & we have to pay penalty .

THANKS

ROYCHOWDHURY

AI Summary

Security Agency Challenges Service Tax Penalty, Cites 2003 Circular; Faces Opposition Under Export of Service Rules 2005 A security agency providing guard services to a 100% Export Oriented Unit (EOU) believed their services were exempt from service tax based on a 2003 circular, claiming these secondary services merged with exported services. Consequently, they did not pay service tax for the fiscal year 2005-06. However, the tax department imposed penalties for short payments, arguing that these services do not merge with exported services. A respondent noted that the 2003 circular became obsolete after the Export of Service Rules, 2005, and Cenvat Credit Rules, 2004, but suggested leveraging the circular until its withdrawal in May 2007.