In Service Tax Appeal No.566 of 2011- CESTAT - CESTAT (Kolkata) rules no intention to evade service tax payment by Bhootpurva Sainik Kalyan Sangh; show cause notice invoking extended period of limitation not sustainable
Members P.K. Choudhary (Judicial) & K. Anpazhakan (Technical) [11-05-2023] 

Read Order: Bhootpurva Sainik Kalyan Sangh v. Commissioner of Central Excise & Service Tax

Chahat Varma

New Delhi, May 22, 2023: Allowing the appeal filed by Bhootpurva Sainik Kalyan Sangh (appellants), the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has held that there was no intention to evade payment of service tax and no mens rea present in the case, therefore, the show cause notice issued on 09.10.2009, invoking the extended period of limitation, was not sustainable.

Factual matrix of the case was that the appellants were a Welfare and Rehabilitation Organization of Ex-Servicemen providing Security Agency Service mainly to Government departments/Public Sector Undertakings. The appellants were not including the wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance etc in the taxable value for the purpose of payment of service tax. A show cause notice was issued to the appellants, demanding service tax for the period from April 2004 to March 2006. The notice was adjudicated by the Adjudicating Authority, and the demand raised in the notice was confirmed through an Order-in-Original. In addition to the service tax, the authority also demanded interest and imposed a penalty equal to the duty under section 78 of the Finance Act, 1994. The appellants subsequently filed an appeal before the Commissioner (Appeals), who upheld the demand confirmed in the Order-in-Original.

The appellants argued that as they were not a commercial concern, no service tax was payable by them for the period prior to 16.06.2005. They further contended that they were unaware that reimbursement charges such as wages, EPF, ESI, Bonus, Gratuity, House Rent Allowance were to be included in the taxable value for the purpose of payment of service tax. They claimed that they had regularly paid service tax on the service charges received and filed ST-3 returns, where they clearly indicated the value on which service tax was paid. The appellants contended that the notice issued on 09.10.2009, invoking the extended period of limitation, was not sustainable as there was no suppression of facts and they had not withheld any information from the department.

The two-member bench of P.K. Choudhary (Judicial) and K. Anpazhakan (Technical) observed that the appellants did not dispute their liability to pay service tax for the security agency services provided by them. They had been regularly filing service tax returns during the relevant period and declaring the gross value on which they paid service tax.

The bench further noted that the appellants had not suppressed any information from the department and had fulfilled their obligation by declaring the taxable value in their ST-3 returns. Therefore, it was concluded that the allegation of suppression of information with an intention to evade service tax payment was unfounded.

The bench also held that the demand for service tax and interest, as well as the penalty imposed under section 78 of the Finance Act 1994, were not sustainable on the ground of limitation.