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

[Dinesh Gupta]

After introduction of Export of Service Rules, 2005 and cenvat credit rules, 2004, the above circular became meaning less. But you may try to take the benefit of circular as long as possible since this circular was withdrawn with effect from May 10,2007

AI Summary

Service tax on exported services: on-site security supplied to an export client may not qualify as export, risking tax and penalties. A security agency supplying on-site guarding services to a 100% export-oriented client relied on Circular No. 56/05/2003 to treat such secondary services as merged with exported services and not liable to service tax. The department assessed service tax shortfall and imposed penalties, rejecting the merger of ancillary guarding services into exported services. Subsequent introduction of the Export of Service Rules and the Cenvat Credit Rules and the withdrawal of the circular with effect from May 10, 2007 removed the circular's operative effect and supported the department's position.