Is the amount not shown in ST3 return on ground of non recovery is liable to service tax?

PJ/CASE LAW/2016-17/3179

Case:- M/s GUJARAT SECURITY GUARD SERVICES Vs COMMISSIONER, CENTRAL EXCISE AND SERVICE TAX, AHMEDABADIII

Citation:- 2016-TIOL-338-CESTAT-AHM

Brief Facts:-The relevant facts of the case, in brief, are that the Appellant herein are engaged in Security Agency Service as defined under Section 65(94) of Finance Act, 1994 w.e.f. 14.10.1998 and providing security service to their clients like ONGC, GEB etc. The Central Excise officers, during investigation, found that the Appellant collected the amount from their clients during the period 1999-2000 to 2003-2004, which was not declared in ST3 return and no tax was paid thereon. A Show Cause Notice, dt.16.09.2004 was issued, proposing demand of Service Tax of Rs.40,07,737.00 alongwith interest and to impose penalty for the period 1999 to January 2004. It
has also proposed to appropriate the amount of Rs.6 lakhs as already paid by the Appellant. The Adjudicating authority confirmed the demand of Service Tax alongwith interest and imposed penalties under the various provisions of Finance Act, 1994. The Commissioner (Appeals) upheld the Adjudication order.

Appellant’s Contention:- The demand was raised merely on the amount as shown in
the ledger account, without taking into consideration the actual receipt. In this context, he drew the attention of the Bench to the Annexure 'A' to Show Cause Notice. It is submitted that the only deduction of TDS has taken while determining the taxable value. It is further submitted that the salaries/minimum wages of the employees, contribution to EPF, ESI etc had not been excluded from the taxable value. He further submits that the Appellant had paid a sum of Rs.24 lakhs against the outstanding demand. It is submitted that they have categorically contested the findingof the lower authorities that they have realized the amount. In this context, the learned Advocate
drew the attention of the Bench to the relevant grounds of appeal. He also submitted thatarbitration proceedings are going on with ONGC and they have not collected the Service Tax from their clients.

Respondent’s Contention:-The learned Authorised Representative for the Revenue strongly opposed the submission of the learned Advocate. He submits that the case relates to 1999 and they have not submitted any document before the lower authorities. So, the Revenue rightly determined the duty liability on the basis of the amount shown in the ledger. He further submits that the arbitration proceedings with the ONGC has no relation with the demand of Service tax.

Reasoning Of Judgment:- The Appellant is a proprietorship firm. It is seen from the grounds of appeal that the Appellant disputed the finding of the lower authorities and categorically stated that they have not collected the amount from their client. It is further stated that though they have issued the bills for these amounts, which are outstanding amount to be recovered from the clients. In this context, the learned Advocate drew the attention of the Bench to the arbitration proceedings with
the ONGC for demanding the dues. The learned Advocate also placed the statement before the Bench that the amount paid to the workers, would not be included in the gross value. He relied upon the decision of the Tribunal in the case of Gujarat Intelligence Security Vs CCE VadodaraI 2010 (19) STR 270 (TriAhmd) = 2010TIOL825CESTATAHM, and the Larger Bench decision of the Tribunal in the case of Shri Bhagavathy Traders Vs CCE Cochin 2011 (24) STR 290 (TriLB) =2011TIOL1155CESTATBANGLB. The submission of the learned Authorised Representative is that the appeal is old one and there is no reason to remand the matter. But, in this case, it appears that the reimbursement expenses including salaries and other expenses, have been included in the taxable value for Security Agency service, which is contrary to the provisions of law and the decision of the Tribunal. So, the Appellant should be given an opportunity to place the documents before the
lower authorities in the interest of justice.

Decision:- Appeal allowed.

Comment:- the gist of the case is that the matter was remanded to provide the assessee to present documents to corroborate his claims of non taxability of his service.

Prepared By: - Alakh Bhandari

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PJ/CASE LAW/2016-17/3179

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