whether the reimbursement of expenses like of salary includible in computing taxable value for security agency services?

PJ/Case Law /2016-17/3323

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

Citation- 2016TIOL338CESTATAHM

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 19992000 to 20032004, 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 along with interest and to impose penalty for the period 1999 to January 2004. It has also proposed to appropriate the amount of Rs.6 lakh as already paid by the Appellant. The Adjudicating authority confirmed the demand of Service Tax along with interest and imposed penalties under the various provisions of Finance Act, 1994. The Commissioner (Appeals) upheld the Adjudication order.

Appellant’s Contention- The learned Advocate submitted that 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 was submitted that the only deduction of TDS was 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 submitted that the Appellant had paid a sum of Rs.24 lakh against the outstanding demand. It was submitted that they have categorically contested the finding of 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 that arbitration 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 submitted that the case was related 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 submitted that the arbitration proceedings with the ONGC have no relation with the demand of Service tax.

Reasoning of Judgment- The Hon’ble court found that the Appellant was a proprietorship firm. It was 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 was further stated that though they have issued the bills for these amounts, which were 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. The Hon’ble court 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 decisionof the Tribunal in the case of Shri Bhagavathy Traders Vs CCE Cochin 2011 (24) STR 290 (Tri LB) = 2011TIOL1155CESTATBANGLB.

The submission of the learned Authorised Representative was that the appeal was old one and there was no reason to remand the matter. But, in this case, it appeared that the reimbursement expenses including salaries and other expenses had been included in the taxable value for Security Agency service, which was 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.
In view of the above discussion, the hon’ble court set aside the impugned order. The matter was remanded to the Adjudicating authority to decide afresh after considering the documents and the submissions of the Appellant. In this context, the learned Advocate undertakes to appear before the Adjudicating authority to submit the documents and appear before the Adjudicating authority within two months from the date of receipt of this order. If the Appellant failed to appear before the Adjudicating authority within this period, the Adjudicating authority shall pass the order in accordance with law, without giving any further opportunity. It was made clear that the order was passed without expressing any view on merits of the case. The appeal was allowed by way of remand.

Decision- Matter remanded.
Comment- the gist of the case is that as per the provisions of law and decisions of tribunal salary and other reimbursement expenses are to be excluded from taxable services in case of security services. Therefore straightforwardly taking the amount from ledger account without considering deductions was not tenable. Accordingly the matter was remanded to adjudicating authority to properly inspect the documents and compute the taxable value.
Prepared by-Akshit Bhandari

Comments

PJ/Case Law /2016-17/3323

Post a Comment

Query