Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Commissioner Of Central Excise, ... on 18 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No.ST/46/2008-Mum. In ST/CO/114/2008-Mum. Appeal No. ST/53/2008-Mum. and Appeal No. ST/189/2009-Mum. In ST/CO/15/2010-Mum. (Arising out of Order-in-Appeal No. PII/PAP/126/07 dated 28/12/2007, and PII/PAP/104/2009 dt. 24.4.2009 passed by the Commissioner of Central Excise (Appeals ) Pune-II For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K.Jain, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
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Commissioner of Central Excise, Pune-II
:
Appellant
Vs.
The commander Security Services
And
The commander Security Services
Vs.
Commissioner of Central Excise, Pune-II
:
Respondent
Appearance
Shri Rakesh Goyal Additional Commissioner (A.R.) for Appellant
Major P. G. Deval, Proprietor for respondent
CORAM:
Mr. S.S. Kang, Vice President
Mr. P.K. Jain, Member (Technical)
Date of hearing : 18/09/2013
Date of decision : /2013
ORDER NO.
Per : P.K. Jain
The brief facts of the case are M/s. The Commander Security Services (hereinafter referred to as assessee) a proprietary concern of Major (Retd.) P.G. Daval was providing security guards to M/s. BSNL for security of their immoveable and moveable properties. As per the terms of agreement between BSNL and the assessee, BSNL was to pay the salary of the guards + 10% as the service charges to the appellants. The entire amount was billed by the assessee and was paid by BSNL to the assessee. From the said amount the assessee, was paying the salary to the security guards and retaining 10% service charges as their profit. Assessee was paying service tax on the service charges alone. Show cause notice was issued to the assessee demanding duty on the gross amount received. The details were taken from the balance sheet, the demand was for the period 2002-03, 2003-04 & 2004-05. The demand notice was issued on 17.4.2006. The assessee contested the demand. However, the original adjudicating authority confirmed the demand. During the adjudication proceedings, the assessee claimed that he is only a supplier of labour/manpower and is a labour contractor and liable to pay the service tax only on the value of the service amount retained by him. Assessee also claimed that he is not providing any security service. He also contested the valuation method adopted by the department. Adjudicating authority however rejected these contentions and considered the services provided as the security services and held that the gross amount collected from M/s. BSNL which includes the salary of the guards would be taxable value for service tax purpose. Assessee filed appeal before Commissioner (Appeals) who vide impugned order rejected the assesses contention relating to the classification of the service and held that the service provided by the appellant are security services. However, Commissioner (Appeals) agreed to the assessees contention as far as the value for computing the service tax is concerned. Commissioner (Appeals) took the view that appellant is required to pay the tax only on the service charges collected and not on the gross amount received. Against the said order the Commissioner (Appeals), both revenue as also the assessee are in appeal before us. Revenue is in appeal against the valuation method adopted by the Commissioner (Appeals). Assessee on the other hand is in appeal on the ground that the services provided by him is of Manpower Supply which were not taxable before 16.6.2005 and therefore appellant is not liable to pay service tax during the impugned period. Aother contention of the assessee is that salary of security guards received by him is nothing but reimbursable expenses and therefore cannot form part of the assessable value.
2. Consequent to the above mentioned order of the Commissioner (Appeals), assessee filed a refund claim before the original authority for the subsequent period which was rejected. The assessee filed an appeal before Commissioner (Appeals) against the said rejection order both on merits as also on unjust enrichment. Commissioner (Appeals) allowed the appeal of the assessee. Revenue is in appeal against the said order also on the ground that the principles of unjust enrichment would be applicable in the situation.
3. We have heard the assessee, who was present in person. He has also submitted a paper book as also written submission which has been taken on record. In addition to various submissions made, assessee has also taken a plea that the salary of the guards is nothing but reimbursable expenses and in view of various judgments reimbursable expenses will not form part of the assessable value. Assessee also contested the Revenues appeal as being not proper and also on invoking extended period of limitation. Assessee quoted the following case laws :
[i] Delhi High Court in the W.P. (C) 6370/2008 of intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India & ANR (2012-TIOL-966-HC-DEL-ST) [ii] Madras High Court in the case of Commissioner of Service Tax Vs. M/s. Sangamitra Services Agency (2013 (7) TMI 862) [iii] Nexcus Computers (P) Ltd. Vs. CCE, Pondicherry 2008 (9) S.T.R. 34 (Tri-Chennai)-Final Order No. Stay Order No.111/200 dated 14-9-2007in in Application No. S/PD/106/2007 & S/EH/550/2007 in Appeal No. S/152/2007 [iv] Om Sai Professional Detective & Sec. Ser. P. Ltd. Vs. CCe, Guntur-2008 (12) S.T.R. 79 (Tri-Bang.)-Final Order NO 570/2008 dt.7.5.2008 in Appeal No. ST/115/2007 [v] Hon. Punjab-Haryana High Court CUSAP No 19 of 2009 date of decision 14-12-2009 [vi] Hon. Patna High Court Miscellaneous Appeal No.535 of 2009 Commissioner of C.E. Patna Vs. M/s. Nirman Cement Ltd. Anr.
[vii] 2007 (5) S.T.R. 280 (Tri.-Mumbai)-Commissioner of C.E. Pune II Vs Kirloskar Ebara Pumps Ltd.
[viii] 2007 (6)S.T.R. 314 (Tri.-Mumbai)-Karnik Maritime Pvt. Ltd. Vs. Commissioner of C. Ex. Mumbai I.
4. We have also heard Ld. AR on the various issues. Ld. A.R. stated that Commissioner (Appeals) has already upheld that assessee is providing security agency services and in the said service wages/all payments made to Security Guards will form part of assessable value. Learned A.R. quoted the following case laws:
[i] Premier Security Enterprises Vs. Commissioner of C.Ex. & Cus., Patna 2009 (15) S.T. R. 735 (Tri,-Kolkata) [ii] Punjab Ex-Servicemen Corpn. Vs. Commr. Of C.Ex., Chandigarh 2009 (13) S.T.R. 529 (Tri.-Del.) [iii] Sudharson Security Bureau Vs. Commissioner of C.Ex., Madurai 2009 (10) S.T.R. 304 (Tri.-Chennai) [iv] Punjab Ex-Servicemen Corpn. Vs. Commr. Of C.Ex., Chandigarh 2009 (5) S.T.R. 214 (Tri.-Del.) [v] Panther Detective Services Vs. Commr. Of C.Ex., Kanpur 2008 (4) S.T.R. 116 (Tri.-Del.) [vi] Security Agencies Association Vs. Union of India 2012 (28) S.T.R. 3 (Ker.)
5. The first issue to be decided is whether the services provided by the assessee can be considered as security services or these are Manpower Supply Services. We have gone through the agreement between the assessee and M/s. BSNL. On going through the agreement it is very clear that assessee is required to provide security guards to M/s. BSNL. Security guards also expected to be in Army Uniform while on duty. The responsibilities of character etc. of the guards remains with the assessee. Assessee is expected to submit bill including their wages to M/s. BSNL and BSNL in turn paid to the assessee. The fact that the assesse is expected to disburse the amount of wages in presence of BSNL official will not made a difference on the nature of service or amount of service tax to be paid. Similarly the way bill is prepared ( i.e. wages plus service charges ) will not make any difference in the nature of service or amount of service tax to be paid. The whole nature of activity leaves no doubt that the services provided by the assessee is the security services. The security agency is defined under the Service Tax as under :
Section 65 (79)-Security Agency means any commercial concern engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including services of providing security personnel.
We are not impressed with the assesses argument that he has only supplied manpower and is a labour contractor being licensed for the said purpose. The reading of the agreement with the BSNL clearly indicated the personal supplied are expected to work as security guard, and ensure security of articles and equipments in the building and offices. Keeping in view the agreement and the definition of the security agency as stipulated under Section 65(79) of the Finance Act, 1994, we have no doubt that the service provided by the assessee is that of security agency. We therefore reject assessees appeal on this aspect.
6. As far as the second issue relating to valuation is concerned, we find the issue relating to the valuation in respect of security agency have been discussed in number of judgment of this Tribunal as also various High Courts. It would suffice to quote judgement of the Kerla High Court in the case of Security Agencies Association Vs. Union of India reported in 2012 (28) STR 3 (Ker.), Honble High Court in the said judgment has observed as under;
8.?Security agencies were brought within the Service Tax Net for the first time, as per the Finance Act, 1998, w.e.f. 16-10-1998; though another class, Man Power Recruitment Agency separately defined under Section 65 was already brought under the net as per the Finance Act, 1997 (Act No. 26 of 1997) w.e.f. 7-7-1997. Section 65(94) of the Finance Act defines the term, Security Agency as follows :
Security Agency means any commercial concern engaged in the business of rendering service relating to security of any property, whether movable or immovable or of any person, in any manner and includes the service of investigation, detection or verification of any fact or activity whether of a personal nature or otherwise including the services of providing security personnel. Section 65(105)(w) defines the term taxable service as follows :
Any service provided to a client by a security agency in relation to the security of any property or person, by providing security personnel or otherwise and includes the provision of services of investigation, detection or verification of any fact or activity.
By virtue of the very nature of the Act, the tax burden is to pass on to the beneficiary and as such the petitioners cannot be stated as aggrieved in any manner, submits the learned Central Government Counsel. So also, it is stated that there is no dispute as to the legislative competence, with regard to the enactment of Finance Act, 1994 providing for fixation of tax in respect of Security Agents reckoning the Gross amount, it is asserted by the respondents, with reference to the law declared by the Apex Court and also the Madras High Court, that sustainability of the provision cannot be questioned or established with reference to the measure of taxation.
9.?After hearing both the sides, and also on going through the specific grounds raised in the writ petitions, this Court finds that, but for the vague challenge as to the constitutional validity of the statutory prescription, no concrete attempt has been made to establish the same. There is no case for the petitioners that the Parliament which enacted the statute does not have the legislative competence to enact the law. So also, no violation of any fundamental right is established with regard to the nature of the business that is being pursued by the petitioners. The sum and substance of the case argued before the Court is that the salary and statutory payments in respect of the engagement of security personnel are liable to be segregated for evaluating the taxable service and thats all.
10.?How the tax has to be realised, what should be the manner of imposition, what should be the extent of liability to be mulcted upon, who are the persons/class/individuals to be brought within the service tax net etc., are matters for the Government to decide, as a measure of policy. It is in furtherance of the said policy, that the law has been enacted by the Parliament by virtue of the power conferred upon it as per the residual entry, i.e., Entry 97 of List I of the Seventh Schedule. The law having been enacted as above, it stands beyond the scope of challenge, with reference to the measure of taxation. It has been specifically observed by the Apex Court in T.N. Kalyana Mandapam Assn. v. Union of India and Others, (2004) 5 SCC 632 (paragraph 46) = 2006 (3) S.T.R. 260 (S.C.) = 2004 (167) E.L.T. 3 (S.C.) that it is well settled that the measure of taxation cannot affect the nature of taxation and therefore, the fact that service tax is levied as a percentage of the gross charges for catering, cannot alter or affect the legislative competence of the Parliament in the matter. As such, there is not much pith or substance in the vague challenge raised by the petitioners herein.
11.?The correctness and sustainability of fixation of service tax with reference to Gross income of the Advertising Agencies in the State of Tamil Nadu, without excluding the expenditure part, while extending such benefits to some others was challenged before Madras High Court, on the plea of discrimination and violation of Article 14, besides challenging the constitutional validity of the statute. After considering the various provisions of the Statute, constitutional mandate and judicial precedents, a Division Bench of the Madras High Court, as per the decision in Advertising Club v. Central Board of Excise & Customs, 2001 (131) E.L.T. 35 (Mad.) = 2006 (2) S.T.R. 457 (Mad.) held that the challenge was unfounded and that the constitutional validity of a taxing provision was not to be decided on the basis of measure of tax, i.e., the deduction allowed. One of the learned Judges, who rendered the above decision had occasion to consider the scope of the said verdict in a subsequent case as well, while sitting in Division with another learned Judge in GDA Security Private Limited v. Union of India, 2002 (140) E.L.T. 332 (Mad.) = 2006 (2) S.T.R. 542 (Mad.) which was in respect of service tax to be satisfied by the Security Agencies. There also, the legislative competence was under challenge, referring to the fixation of liability based on the Gross income without segregating the expenditure part and also on the ground of discrimination. After an exhaustive analysis of the relevant aspects, the learned Judges observed that the challenge raised was not sustainable, holding that, it was for the State to decide as to which agency was to be taxed and which was not to be taxed. The Legislature had a discretion in levying tax on a particular class and such discretion has always been recognised and approved by the Apex Court. The Bench also referred to the observations of the Constitution Bench of the Supreme Court in Federation of Hotels and Restaurant v. Union of India, AIR 1990 SC 1637 which is extracted below :
It is now well settled that though taxing laws are not outside Art. 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal-policy Legislature enjoys a wide latitude in the matter of selection of persons, subject matter, events, etc, for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment, what is looked into is not its phraseology, but the real effect of its provisions. A Legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. The Legislature can exercise an extremely wide discretion in classifying item for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. This Court finds that the decision rendered by the Madras High Court, as above, is on the point, as to the issue involved in these writ petitions as well. As such, this Court holds that the issue cannot be answered in favour of the Revenue, especially on the question of law.
12.?As observed by the Apex Court in T.N. Kalyana Mandapam Assn. v. Union of India and Others, (2004) 5 SCC 632 = 2006 (3) S.T.R. 260 (S.C.) = 2004 (167) E.L.T. 3 (S.C.) Service tax is an indirect tax and the role of the service provider is only to have it collected on behalf of the Revenue. The service provider is expected to collect it from the client. The observations of the Apex Court in this context are worthwhile to be noted, as extracted below :
Moreover, a tax cannot be struck down on the ground of lack of legislative competence by enquiring whether the definition accords what the laymans view of service is. It is well settled that in matters of taxation laws, the Court permits greater latitude to pick and choose objects and rates for taxation and gives a wide discretion with regard thereto. Therefore, a levy of service tax on a particular kind of service could not be struck down on the ground that it does not conform to a common understanding of the word service, so long as it does not transgress any specific restriction contained in the Constitution. Viewed in the said circumstances, this Court finds that the challenge raised by the petitioners against the validity of the statute is devoid of any merit.
13.?It is revealed from the materials on record, particularly the specific averments raised in the counter affidavits and documents produced in the concerned cases, that the service providers/security agencies have raised bills on the prospective customers/service receivers, also including the service tax component. Ext. R2 bill produced in W.P. (C) No. 9591 of 2005 shows realisation of service tax at the rate of 5% to be paid by the service receivers. Ext. R1 in W.P. (C) 9591/2005 is the income and expenditure account of the said writ petitioner showing the salary and other benefits paid to the security personnel and Ext. P3 is the relevant agreement with the service receiver. There is no master and servant relationship between the security personnel and the clients/service receivers. The respondents have specifically averred in paragraph 9 of the counter affidavit in the said case that the petitioner in the said writ petition had earlier approached this Court by filing W.P. (C) 20017 of 2004 and 17045 of 2004 for a direction to reimburse the service tax, which they failed to collect from their clients, due to non-inclusion of such provision for realising service tax in the agreement with the clients. The aforesaid writ petitions were disposed of, directing the respondents to consider the claim of the petitioner and pass orders as specified. It is also contended that the said petitioner has preferred this writ petition [W.P. (C) 9591 of 2005] without revealing anything as to the filing of the earlier writ petitions and the turn of events.
14.?The contention of the petitioners that they are virtually Man Power Recruiting Agents and that their service is to be valued on the quantum of the commission they receive is wrong and unfounded. As mentioned hereinbefore, Man Power Recruiting Agency service is a separate entity which was brought within the Service Tax Net w.e.f. 7-7-1997 as per the Finance Act, 1997, whereas the Security Agency Service was brought in for the first time only w.e.f. 16-10-1998, as per the Finance Act, 1998. Both the above terms have been separately defined under Section 65. In the case of the latter, the Security Agency is the Employer of the security personnel deployed to cater to the requirements of the service receivers, for which the service receivers effect the payment to the service providers, as per the terms of the contract. The Master and Servant relationship is between the Security Agency and the Security Personnel engaged and not between the Service Receivers and the Security Personnel. The service providers like the petitioners are very much authorised and entitled to pass on the liability towards salary and statutory payments to the Service Receivers by raising the Bills including such amounts payable as Service tax. As such, they cannot be stated as aggrieved in any manner with regard to the liability imposed under the Statute and they cannot be stated as a loser in this regard. The role of the Security Agencies like the petitioners is only to act as agents in the matter of collection of Service tax. The liability to pay service tax cast upon them under Section 68 of the Act, in turn could be passed on, to be satisfied by the Service Receivers.
7. Learned A.R. has quoted a number of judgments on the aspect of valuation which support Revenues contention that wages of the security guards will form part of the assessable value. Learned assessee has quoted certain judgments relating to reimbursable expenses. These judgements are not relating to security agency service but are mainly relating to consulting engineer or other consulting services and relate to Hotel/Travelling expenses. Those judgments cannot be applied for security service, particularly wages cannot be called reimbursable expenses, (these are not incidental for providing the service tax the main element is providing the service we therefore, reject the assesses contention that wages are nothing but reimbursable expenses. We therefore hold that at wages of security guards will form part of the assessable value as far as security agencies service concerned. We do not consider it necessary to discuss, every judgement quoted by revenue or assessessee.
We, therefore allow Revenues appeal on merits.
8. Another contention of the assessee is that appeal has not been filed by the department after following the due process. We have seen the appeal papers, order of Commissioner (Appeals) has been examined by the Committee of Commissioners. The Committee of Commissioners vide their order dt. 13.2.2008 have examined the order and thereafter issued the direction of filing the appeal. Order undoubtedly indicates application of mind. Consequent to the said decision of the committee, the appeal has been filed by the Additional Commissioner review, who was authorized by the committee to file the appeal. We, therefore, do not find any substance in the assessees contention on this aspect.
9. As far as the assesses contention about the limitation is concerned, we find that the assessee had taken the registration and also filing the returns wherein all the details were being indicated. We also note that the assessee a Retd. Army officer was not collecting any service tax from his client even on the service charges. Keeping in view peculiar facts and circumstances of the case, we find that ingredients to invoke the extended period are absent in the present case. Accordingly, we set aside the demand which is beyond the normal period of limitation. We also observe that only a part of the demand i.e. from October 2004 to March 2005 will remain within the normal period of limitation. The demand within the normal period is confirmed. We also consider the case to be fit for waiving the penalty by exercising the power under Section 80 of the Finance Act, 1944. We accordingly set aside the penalties imposed.
10. As far as the second appeal filed by the Revenue is concerned we find that in view of the fact that we have upheld the demand on merits (i.e. value for service tax purpose will include wages also) assessee will not be entitled to the refund claim filed by him (even for the period April 2006 to September 2007). Even otherwise, it cannot be said that doctrine of unjust enrichment will not be applicable under the circumstances. It is for the assessee to prove that burden of duty is not passed on. Assessee has also contended that appeal is filed beyond the period of three months. We have pursued the records, order-in-appeal was received in Commissioners office on 8.5.2009 (though Assistant Commissioner Sangli received it on 6.5.2009) and therefore appeal is filed within three months. Assessees contention is therefore rejected. Appeal has been filed as per direction of Committee of Commissioners with due application of mind. Accordingly, the appeal filed by Revenue against sanctioning of the refund claim is allowed.
11. All the appeals and cross-objections are allowed in above terms.
(Pronounced in court on ..) (S.S. Kang) Vice President (P.K. Jain) Member (Technical) Sm ??
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