Custom, Excise & Service Tax Tribunal
The Deputy Commandant Csf vs Commissioner Of Central Goods & Service ... on 3 July, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Service Tax Appeal No. 41011 of 2015
(Arising out of Order-in-Appeal No. 36/2015 dated 19.03.2015 passed by Commissioner of
Central Excise (Appeals - I), No. 1, Foulks Compound, Anai Road, Salem - 636 001)
The Deputy Commandant ...Appellant
Central Industrial Security Force,
Salem Steel Plant, Alagusamudram,
Maramangalathupatti,
Salem - 636 013
Versus
Commissioner of GST and Central Excise ...Respondent
Salem Commissionerate, No. 1, Foulks Compound, Anai Road, Salem - 636 001.
APPEARANCE:
For the Appellant : Ms. Shwetha Vasudevan, Advocate For the Respondent : Ms. O.M. Reena, Authorised Representative CORAM:
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER No. 40692 / 2025 DATE OF HEARING : 27.01.2025 DATE OF DECISION : 03.07.2025 Per Mr. VASA SESHAGIRI RAO The Deputy Commandant, Central Industrial Security Force, Salem, Tamil Nadu (hereinafter referred to as the Appellant) has filed this appeal ST/41011/2015 assailing the Order-in-Appeal No. 36/2015 dated 19.03.2015 passed 2 ST/41011/2015 by the Commissioner of Central Excise (Appeals-I), Coimbatore.
1.2 The Appellant holding Service Tax RC bearing NO.CHEO04295EST001 are engaged in the provision of "Security Agency Service" to Steel Authority of India Limited, Salem Steel Plant, Salem (SSP). Intelligence was gathered by the Department that the Appellant have not discharged their Service Tax liability correctly on the Gross Amount received for providing the said Taxable Service to M/s. Salem Steel Plant, Salem and not furnished correct information in the prescribed Half-Yearly ST-3 Returns in contravention of the provisions of Sections 67, 68 & 70 of the Finance Act, 1994, read with Service Tax Rules, 1994. Hence, vide letter C.No.IV/06/45/2012 HPU (SIV III) dated 13-07-2012, the General Manager, Steel Authority of India Limited, Salem Steel Plant, Salem (SSP) was asked by the Department to furnish the following documents / details :-
i. Copy of contract / terms and conditions for engaging the services of CISF;
ii. Month-wise details of amount paid to CISF towards salary and allowances, initial clothing and equipment charges, arms and ammunition, leased accommodation, medical expenses, vehicle running and maintenance, telephone, stationery, dog squad, insurance and any 3 ST/41011/2015 other expenses for the period from 01.04.09 to 31.03.12.
1.3 The General Manager (F & A), Salem Steel Plant, vide his letter dated 05.07.2012 informed that as per the MOU entered into with the Appellant, in addition to salary and wages, SSP has to provide Office and Residential accommodation, transportation facility, furniture for office, medical facility etc. at free of cost to the Appellant. He further informed that they are making payment of salary and allowances, pension and leave salary contribution, TA/DA, cost of clothing and cost of arms and ammunition and that all these payments are billed by CISF with applicable Service Tax thereon. A copy of the MOU entered into with CISF was also furnished.
1.4 Thereafter, vide letter dated 01.08.2012, the General Manager, Salem Steel Plant, Salem was asked by the Department to furnish Month-wise details of amounts paid to CISF towards salary and wages, pension and leave salary contribution etc. and monetary consideration equivalent to the various amenities provided to M/s. CISF.
After two reminders, the said details were provided by the Assistant Manager (F & A), SSP, Salem on 27.12.2102. While perusing the said details, it was noticed by the Department 4 ST/41011/2015 that an amount of Rs. 10,45,145/- paid to CISF during the period from April 2009 to March 2012 was shown under the heading "Others".
1.5 The Department issued a letter dated 31.12.2012 asking, SSP, Salem to clarify the nature of amenities provided to CISF, which are quantified under the heading "Others". Vide e-mail dated 12.01.2013, the Junior Manager (F&A), SSP furnished the break-up for the amount of Rs.10,45,145/-.
1.6 Vide letter dated 15.01.2013, the Department asked the Appellant to explain the reasons for not paying Service Tax on the entire consideration received from M/s Salem Steel Plant (both by way of cash and by way of amenities) during the period from 01.04.2009 to 31.03.2102. The Appellant failed to furnish any reasons for not including the value of amenities provided by Salem Steel Plant in the taxable value for payment of service tax. 1.7 Further, vide letter dated 01.04.2013, the Department asked the Appellant to furnish the particulars in respect of No. of Officers staying in residential Quarters/barracks, month wise for the period from 01.04.2009 to 31.03.2012 and whether HRA is paid to such 5 ST/41011/2015 Officers and if not the amount of HRA withheld, month-wise for the period from 01.04.2009 to 31.03.2012. The Appellant vide their letter dated 15.04.2013 furnished the details of number of Officers staying in residential quarters / barracks and details of HRA payable to their staff for the period from 01.04.2009 to 31.03.2013 in respect of CISF unit SSP Salem.
1.8 In respect of Office accommodation, M/s Salem Steel Plant vide their letter dated 25.10.2013 informed that they have not recovered any proceeds from the Appellant for the same and other infrastructure facilities offered to them. 1.9 As per MOU entered into between the Appellant and Steel Authority of India, Salem Steel Plant, Salem a. SSP shall provide the infrastructure, office accommodation, security related infrastructure, residential accommodation (married and bachelor), communication (including telephone / wireless / internet), transport, modern security gadgetry, furniture and other equipment / amenities, for deployment of CISF at the unit;
b. CISF reserves the right to incur the expenditure on infrastructure items like strengthening of Kote, Explosive Magazine, Morchas, Watch Towers, Fencing 6 ST/41011/2015 etc. and the expenses so incurred will be recouped by SSP.
c. CISF will procure arms and ammunition, critical gadgets, security system etc. which may be required to be deployed in compliance with the provisions contained in the MOU and the cost of the same shall be borne by SSP.
d. SSP shall provide medical facilities to the CISF personnel and their families strictly at par with their own employees. SSP shall also reimburse the medical claims of family members of CISF personnel who are staying away from the unit at par with rates given to their own employees.
e. The deployment of the force with be entirely at the cost of SSP, which will include the following cost of deployment of CISF personnel;
i. Salary and allowances;
ii. Pension and Leave salary contribution;
iii. Travelling Allowance / Daily Allowance; iv. Proportionate cost of raising and continuing training of personnel;
v. Supervision and monitoring charges; vi. Cost of Clothing;
vii. Cost of equipment if not provided by SSP; viii. Cost of arms and ammunition;
7
ST/41011/2015 ix. Taxes as prescribed by the Central Government, State Government and Local bodies; and x. Any other charges as specifically agreed between the parties to the MOU.
1.10 The Appellant was paying Service Tax during the period from 01.04.2009 to 31.03.2012 for the Heads, viz. (i) Salary, (ii) Arms and Ammunition, (iii) Clothing and (iv) Pension (upto November, 2010 thereafter excluded). However, the Appellant did not include the value of the following Heads till 31.03.2012 for the purpose of payment of service tax, viz., (i) Pension (from December 2010 onwards), (ii) Misc. Expenses, (iii) Medical facilities, (iv) Transportation and (v) Cost of accommodation both office and residential.
1.11 Consequently, the Show Cause Notice (SCN) dated 02.12.2013 was issued to the Appellant requiring the Appellant to show cause to the Additional Commissioner of Central Excise, Salem as to why-
i. Proviso to sub-section (1) of Section 73 of the Finance Act 1994, should not be invoked against them to demand service tax beyond the normal period; 8
ST/41011/2015 ii. Service Tax of Rs.26,82,467/- (Rupees twenty six lakhs eighty two thousand four hundred and sixty seven) should not be demanded from them under proviso to Section 73(1) of the Finance Act 1994; iii. interest at the appropriate rates should not be demanded from them under Section 75 of the Finance Act 1994, on the service tax demanded at Sl.No.(ii) above; and iv. penalty should not be imposed on them under Sections 76, 77(2) and 78 of the Finance Act 1994. 1.12 After due process of adjudication, the Joint Commissioner of Central Excise, Salem vide Order-in-Original No. 68/2014 JC (ST) dated 11.12.2014, ordered invocation of extended time limit under proviso to Section 73(1) of the Finance Act, 1994 and confirmed the demand of Service Tax of Rs.26,82,467/- from the Appellant under Section 73(2) of the Finance Act, 1994. Further, interest was demanded from the Appellant under Section 75 of the Finance Act, 1994 and penalty of Rs.26,82,467/- was imposed on the Appellant under Section 78 ibid along with penalty of Rs.10000/- under Section 77(2) of the Finance Act, 1994.
2. The Appellant carried the matter in appeal and the appeal bearing A.No. 40/2015-ST filed by the Appellant 9 ST/41011/2015 was rejected by the Commissioner of Central Excise (Appeals-I Coimbatore) vide the impugned order dated 19.03.2015.
3. Being, aggrieved by the impugned order dated 25.03.2015 passed by the Commissioner of Central Excise, the Appellant has filed this appeal on the following grounds that: -
A. The Appellant is not receiving any 'Additional Consideration' for the security services, if any, rendered by way of deputation of security personnel to SSP. Therefore, demand of Service Tax on such notional consideration is not sustainable.
i. During the relevant period, they were paying service tax under the category of security services as defined in section 65(105)(w) of the Act. Section 65(105)(w) of the Act specifies three services of security agency service which is liable to be covered under the said sub-clause. They are: -
→ Services relating to the security of any property, whether movable or immovable or of any person, in any manner → Services of investigation, detection or verification of any fact or acivity, whether of personal nature or otherwise 10 ST/41011/2015 → Services of providing security personnel If at all the Appellant is considered as providing security agency services, it would be more appropriately covered by clause c) above. In other words, the security services provided by the Appellant are by way of provision of security personnel. This stands affirmed by the MOU and the CISF Act which have been listed below: -
1. Section 14 of the CISF Act only provides for deputation of security personnel to industrial undertakings including public sector undertakings.
2. Section 7(2) of the CISF Act provides that the supervisory officer would discharge his duties under the general superintendent, control and direction of the Managing Director of the industrial undertaking. A similar provision is made under Rule 9 of the CISF Rules, 2001 which provides that the force deputed to an undertaking shall work under the general supervision, direction and control of the Managing Director.
3. Further, Rule 61(1) of the CISF Rules provides that the undertaking, where the force has been deputed, shall provide accommodation in the township itself to the gazetted officers as well as other personnel ranging from inspector to constable.
4. Clause 2 of the MOU, which defines the scope, states that the parties have agreed to depute 11 ST/41011/2015 the CISF personnel from time to time to the Client Organisation (i.e. SSP).
5. SSP is liable to provide the infrastructure, office accommodation, security related infrastructure etc for the deployment of CISF personnel.
6. SSP should comply with the minimum pre- induction formalities as stated out in the MOU.
7. The deployment of the force will be entirely at the cost of the Client Organisation (i.e. SSP) which inter-alia include the following costs of deployment of CISF personnel ▪ Salary and allowance;
▪ Pension and leave salary contribution ▪ Travelling and Daily Allowances ▪ Proportionate cost of raising and continuing training of personnel ▪ Supervision and monetary charges ▪ Cost of clothing ▪ Cost of Arms, ammunitions, equipment ▪ Any other charges especially agreed between the parties of the MOU ii. The CISF Act and MOU only provide for deputation of the CISF personnel. This implies that the Appellant is only permitted under the CISF Act to depute the personnel. While the Appellant is entrusted with the security of the industrial undertaking, the duty is discharged by way of deputation of security 12 ST/41011/2015 personnel who function under the superintendence, direction and control of the industrial undertaking to which they are deputed.
iii. In order to use the services of such security personnel, SSP must make suitable provision of free accommodation for the personnel deputed at its premises.
iv. This effectively leads to the conclusion that the security services of CISF are confined to supply of security personnel who function under the supervision, direction and control of the industrial undertaking. Accordingly, Section 67 of the Act which is subject to Section 66 read with Section 65(105)(w) of the Act would operate only to the extent of the value for such service.
v. Rule 5 of the Valuation Rules lays down the various costs and expenditure that are to be included or excluded from the value of taxable service. The scope of Rule 5(1) is restricted to the expenses incurred by the service provider and reimbursed to him by the service recipient. Rule 5(1) does not cover the expenditure incurred as such. Rule 5(2) of the Valuation Rules provides for exclusion of only expenditure or cost incurred by the service provider as a pure agent of the recipient of the service; not 13 ST/41011/2015 all payments received by a service provider will constitute a part of the value of the taxable service, but only those payments (in cash/kind) which are in consideration for the taxable service provided will become the value of the taxable service. vi. The gross amount charged by the Appellant consists of the amount towards salary & allowances, clothing & equipments, arms & ammunitions, medical, telephone & stationary expenses etc of the security personnel. However, in order to effectively use the services of security personnel for the purposes of security of its premises, SSP is making available free accommodation, medical facilities and vehicles for transportation to the personnel.
vii. When the scope of services is restricted to supply of security personnel, the amount charged by the Appellant towards the supply of security personnel shall only form part of the value of such service. The expenses incurred by SSP, being the service recipient, in the form of accommodation and vehicles for transportation, during the deployment of security personnel under the supervision of Managing Director of SSP, enabling them to be utilized for the security of their premises, shall not be included in the value of the services provided by the Appellant. 14
ST/41011/2015 viii. Reliance is placed on the case of Punjab Ex-Service Men Corporation v. Commissioner of Central Excise, [2007 (5) STR 214 (Tri-Delhi)], the operative part of which is as follows:
"As regards the question of valuation, it is abundantly clear from the definition as forthcoming from the Act that the gross amount charged by the appellant from their clients become taxable value. In no unclear terms the CBEC has clarified this aspect stating that the gross amount charged by such agency from their clients has to be taken as the value for the purpose of levy of service tax."
In this regard, further reliance is placed on para 10 of the decision of Delhi High Court in Intercontinental Consultants & Technocrats Pvt. Ltd. V. Union of India wherein the Hon'ble Delhi Court in clear terms states that it is only the value of the service rendered that should be brought to charge under Section 67 of the Act. The Appellant is rendering the security service by way of deployment of security personnel and it is only the value which represents the activity of supply of security personnel which should be brought to tax under Section 67 of the Act. The value of providing security personnel will not include the specified costs which are incurred by SSP at the behest of SSP for maintenance of security personnel cannot be said to provide a benefit to the Appellant and hence cannot amount to consideration, directly or indirectly. 15
ST/41011/2015 ix. The value which is billed by the Appellant is the value for deployment of security personnel and represents the full consideration of service in the form of deputation of service personnel. The additional costs incurred by SSP cannot be treated as consideration for the service of deployment of security personnel. The Appellant is appropriately covered by Section 67(1)(i) of the Act and the invocation of Section 67(1)(ii) of the Act in respect of the various costs incurred by SSP is incorrect. x. The facilities in the nature of medical benefit, etc. are provided by SSP to the CISF personnel in terms of Rule 62 of the CISF Rules, 2001.
xi. The costs incurred by SSP to the Appellant such as electricity/water charges, supply of vehicles, supply of fuel, provision of medical treatment, supply of forms and stationery are procured for the benefit of SSP rather than for the benefit of the Appellant. The costs incurred by SSP are pre-conditions for the deployment of the CISF personnel under the MOU and have to be mandatorily complied with by SSP in order to avail the services of the Appellant. These costs are factually incurred by SSP from third party agencies and are to be borne by SSP. Such costs will 16 ST/41011/2015 also not form part of the value of the taxable service as it is not a consideration for any service. xii. The costs incurred by SSP are not consideration in terms of the definition of the term "consideration" as provided in the explanation to Section 67 of the Act. Consideration (for the purposes of Section 67) can only be in monetary terms and non-monetary consideration shall not fall within the definition of 'consideration' as per Section 67 of the Act. xiii. In the present case, the costs incurred by SSP are not being borne in return for the services provided by it and therefore do not constitute 'consideration' for the services. Consequently, no service tax is payable by the Appellant.
In this regard, reliance is also placed on the case of Apitco Ltd. v. CCE, Hyderabad - 2010 (20) STR 475 (Tri-Bang) maintained at 2011 (23) STR J94 (SC) wherein the Hon'ble CESTAT held that a consideration should flow from the service receiver to the service provider over and above any expenses paid. That if no consideration is paid then service tax is not payable.
xiv. It is submitted that the amounts which are paid by SSP are nothing but in the nature of reimbursable expenditure not includible in the value of the taxable 17 ST/41011/2015 service in any situation including a situation where the same were incurred by the Appellant. The Hon'ble High Court of Delhi in the case of Intercontinental Consultants and Technocrats P. Ltd. v. Union of India (supra) held that the expenses which are in the nature of reimbursements cannot be included under the provisions of Section 67 of the Act.
B. The cost of deployment is not "Consideration", but is in the nature of statutory fees. When the primary cost of deployment itself is not liable to tax, the alleged additional consideration are not liable to tax.
i. Even if the Appellant is providing "security agency services" to SSP, the Appellant is not receiving any consideration for the said service. The payments being made by SSP to the Appellant are in the nature of statutory fees to meet the cost of deployment of the security personnel. Where this primary payment to the Appellant itself is not consideration, there cannot be a question of any additional consideration being attributable to the activity being undertaken by the Appellant. ii. In the first place no consideration is paid either in cash or in kind by SSP to the Appellant for receiving security agency service. SSP only paying charges to 18 ST/41011/2015 the members of the Armed forces as per the provisions of the CISF Act. Further the Appellant charges Supervision Charges at a nominal percentage from SSP. Such charges paid to the Appellant is for meeting the day to day expenses of the Head Office of the Appellant. The Appellant in this regard places reliance on Rule 73 of the CISF Rules, 2001.
iii. The deployment of security personnel is as part of the statutory functions of the Appellant under the CISF Act.
iv. No consideration in any form is flowing from SSP to the Appellant. Any amount paid to by SSP to the Appellant is a statutory levy i.e. the charges paid by SSP to the Appellant as per the Act read with the Rules and the same cannot be considered as consideration for demanding service tax under the provisions of the Security Agency Service. In the absence of a consideration to the Appellant, there cannot be an additional consideration to the Appellant. The Appellant in this regard places reliance on the case of LSE Securities Ltd. v. CCE - 2013 (29) STR 591 (Tri - Del) wherein Turnover charges, Stamp duty, charges paid to SEBI in accordance with Indian Stamp Act and SEBI 19 ST/41011/2015 Guidelines were held to be not included in the Assessable value for charging service tax. C. The appellant is not liable to pay Service Tax on the reimbursements of expenses received by them during the impugned period.
i. The specified costs containing the amounts paid for, namely, miscellaneous expenses, medical facilities and transportation are paid to the Appellant as reimbursement of business expenses. At the outset, the issue as to whether service tax is payable on the reimbursements in terms of Rule 5 of the Service Tax (Determination of Value) Rules, 2006 has been decided in the judgment of Hon'ble High Court of Delhi in the case of Intercontinental Consultants and Technocrats P. Ltd. v. Union of India [2012 - TIOL - 966 - HC -ST - DEL] wherein Rule 5 of the Valuation Rules has been held to be ultravires of Section 67 of the Act.
ii. The amounts on which service tax is payable for the reimbursements made works out to Rs. 9,48,087/-. Accordingly, demand of service tax to the tune of Rs. 9,48,087/- towards the amounts realized as reimbursements of expenses by the Appellant needs to be dropped, as reimbursement cannot be 20 ST/41011/2015 considered as consideration in view of settled judicial precedents.
iii. It is submitted that if the Appellant is not granted the benefit of the judicial precedent, regard must be had to Rule 5(2)(i) of the Service Tax (Determination of Value) Rules, 2006 where the expenditure or costs incurred by the service provider is excluded from the value of the taxable service when the said service provider acts as a pure agent of the service recipient. Since the Appellant is pure agent for the limited purposes of Service Tax (Determination of Value) Rules, 2006, the reimbursement expenses cannot be included in the value of the taxable service.
D. The appellant is a creation of Statute and is not undertaking any business. Hence, it is not covered within the ambit of Security Agency's Service.
i. It is argued that Appellant is a creation of a Statute and not covered under the definition of security agency as defined in the Act. It is seen from the Act that to be covered under the definition of a security agency as per the Act, the following conditions have to be fulfilled:
1. That the person is engaged in the business.21
ST/41011/2015
2. The business is of providing security to any property, immovable or movable or person.
3. That the service also includes investigation, verification or detection of any fact or activity whether personal or otherwise.
4. That the service of providing security personnel is also covered.
Thus, a person will be covered within the definition of a security agency when it is engaged in the business of providing security and undertakes any of the services as mentioned at serial no. b, c and d. The Appellant is not engaged in the business of providing security. Hence, it is not liable to pay service tax under security agency service. ii. Reference is invited to the Department's Circular No. 89/7/2006-ST., dated 18.12.2006 wherein it is stated that statutory functions performed in terms of specific responsibility assigned to a sovereign / public authority under law in force, does not constitute provision of taxable service to a person and therefore no service tax is leviable on such activities. Hence it is evident that the security provided by the Appellant to SSP under the relevant Act / Rules is not a taxable service provided to any particular individual but a statutory function. Here, 22 ST/41011/2015 reliance is placed on the decision of [Security Guards Board v. CCE - 2011 (24) STR 391 (Bom.)]. iii. The Appellant had contended before the lower authorities that the SCN relies heavily on Circular F. No. 345/1/2007 - TRU dated 19.08.2008 for demanding service tax from the appellant. The above Circular does not provide any basis for demanding service tax from CISF under security agency service. The Appellant submitted before the authorities that the above Circular of the Department is contrary to the provisions of the Act and cannot be relied upon to demand service tax from the Appellant. Here, reliance is placed on the decision in the case of CCE v. Ratan Melting and Wire Industries - 2008 (12) STR 416 (SC.). However, the impugned order has been passed relying on the said circular again to confirm the demand.
E. Rule 3 of the Valuation Rules cannot be invoked for the purpose of computation under Section 67(1)(ii) of the Act. It is submitted that: -
i. Invoking Rule 3 of the Valuation Rules in the present case is incorrect in the facts of the case.
ii. Section 67 of the Act states as follows:23
ST/41011/2015 "(1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall,-
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner"
Section 2 (86) of the Act defines 'prescribed' to mean prescribed by rules made under this Chapter. Section 67 of the Act provides for levy of service tax with reference to value under three circumstances:
a) Where consideration is in money, gross amount charged
b) Where consideration is not wholly or partly in money, such amount in money which is equivalent to consideration
c) Where consideration is not ascertainable, as amount determined in the prescribed manner.24
ST/41011/2015 iii. Section 67 of the Act determines the value for the purpose of levy of service tax. The three circumstances enlisted above aim at arriving at the consideration for the service. Among the three circumstances, the Act provides for computation of the value in terms of the Rules only if the case of the assessee falls under clause (iii) of section 67(1). The section does not provide for reference to any prescribed rule for cases which fall within section 67(1)(ii) of the Act. The Appellant's case does not also fall under section 67(1)(iii) of the Valuation Rules on account of the reason that value, if any, is ascertainable. Thus, the provisions of Rule 3 of the Valuation Rules cannot be invoked to the present case and the impugned order confirming the demand in terms of the same is not sustainable and it is liable to be dropped. F. There is no suppression of information by the Appellant. Hence the extended period of limitation is not invocable.
i. The Appellant has never suppressed any fact relating to the activities carried on by them with an intention to evade payment of service tax. The Appellant was under the bona fide belief that service tax on the said activities is not payable based on the 25 ST/41011/2015 reasons mentioned above. Further, the bonafide belief was based on the CBEC Circular issued by the Department exempting the Appellant from payment of service tax up to 31.3.2009.
ii. The Appellant has not committed any positive act to suppress information from the department with the intent to evade payment of service tax. In this regard, reliance is placed on the judgment of the Hon'ble Supreme Court in the case of M/s Anand Nishikawa Co Ltd Vs Commissioner of Central Excise, Meerut reported at 2005-TIOL-118-SC-CX wherein it was held that "there must be some positive act from the side of the assessee to find wilful suppression". Same view was taken in the case of i. Padmini Products Limited v CCE reported at 1989 (43) ELT 195 (SC), ii. CCE v. Chemphar Drugs & Liniments 1989 (40) ELT 276 (SC) iii. Gopal Zarda Udyog v. CCE 2005 (188) ELT 251 (SC) iv. Lubri-Chem Industries Ltd. v. CCE 1994 (73) ELT 257 (SC) iii. The Appellant was under the bonafide belief that service tax already paid by them is in order. In this regard, reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Company v CCE reported at 1995 26 ST/41011/2015 (78) ELT 401 (SC) and CCE v. Punjab Laminates Ltd. 2006 (202) E.L.T. 578 (S.C.).
iv. Earlier audit conducted on the accounts of Appellant indicate lack of mala fides. An internal audit was conducted on 07.03.2013 for the period 02/2011 to 02/2013 and no such observation was made as to the inclusion of expenses incurred by the Appellant in the value of taxable services. Two audit paras for non-payment of interest and non-filing of ST-3 returns for the above period were raised for an amount of Rs.72,576/- which has been dutifully paid by the Appellant.
v. The issue involves interpretation of law as evident from the fact that the issue of whether reimbursements can be taxed was referred to Large Bench of CESTAT and Larger Bench decided the issue. In such a situation, no suppression can be alleged on part of the Appellant. In this regard, reliance is placed on the following judgments:
(a) CCE v. NIRC 2009 (13) STR 196 (Bom.)
(b) Ispat Industries Ltd. v. CCE 2006 (199) ELT 509 (Tri.-Mum)
(c) Chemicals & Fibres of India Ltd. v. CCE 1998 (33) ELT 551 (Tri.)
(d) Homa Engineering Works v. CCE 2007 (7) STR 546 (Tri-Mum)
(e) Jaihind Projects Ltd. v. CCE, 2010 (25) STT 196 (Tri-Ahmedabad) 27 ST/41011/2015 vi. Extended period of limitation is not applicable in cases of dispute of interpretation of law. In this regard, reliance is placed on the decision of the Hon'ble Tribunal in the case of K.K. Appachan v.
CCE, Palakkad, 2007 (7) S.T.R. 230 (Tri-Bang.) wherein it is held that, "... Moreover as the issue involves interpretation of law, the longer period cannot be invoked."
vii. The Appellant is a Central Government Agency and is not engaged in any commercial activities and they did not gain any pecuniary benefits from the said non-payment of tax. Thus, there can be no intention to evade payment of Service Tax. For this reason also, the extended period of limitation is not invocable.
4.1 The Ld. Advocate Ms. Shwetha Vasudevan have appeared and argued for the Appellant. After reiterating the grounds of appeal, she submitted that the issue is no longer res integra and stands settled in favor of the Appellant. She has placed reliance on the Tribunal Chennai's Order in the Appellant's own case in ST/42703/2014 in CISF, DIG unit Neyveli Vs. Commissioner of Central Excise and Service Tax on identical issue on facts and law, it was held in favour of the Appellant both on merits as well as on the aspect of 28 ST/41011/2015 limitation vide Final Order No. FO/ST/A/40453/2024-ST/DB dated 22.04.2024. It was ruled that notional value of the medical services, rent free accommodation, rent free office premises, vehicles, electricity and water expenses, fuel expenses, medical treatment expenses, expenses for forms and stationery cannot be included in the gross value so as to subject it to levy of service tax. The decision in CISF DIG unit (supra) has attained finality since no Appeal has been preferred by the Department against this order. 4.2 She submits further that the issues involved in the present case are squarely covered by various decisions passed by the coordinate Benches, as summarized below: -
Sl. Case law Ratio in the Decision
1 CCE Dehradun It is clear that in case any amount is payable qua to CISF the
v. accommodation being provided to the security personnel that it shall
Commandant, be the consideration. If it is consideration, then only Rule 3 of
CISF Determination of Value Rules will come into picture. Considering that
[2019 (2) TMI no amounts are paid to CISF, the question of notional value of
1175-CESTAT the free accommodation provided cannot form the part of the gross
NEW DELHI] value, and hence cannot be taxed (paragraph 7).
Period involved: April 2009 - June 2012. 2 CISF v. CCE, Certain expenses incurred while receiving services, like Medical Allahabad, Services, expenses on vehicles provided, expenditure on Dog Squad, [2019 (1) TMI Stationery Expenses, Telephone Charges were incurred by AAI, and 1661-CESTAT the question was whether it formed part of consideration. Followed ALLAHABAD] Union of India v. Intercontinental Consultants and Technocrats Pvt.
Ltd. 2018 (3) TMI 357- Supreme Court (supra) to hold that the expenses are not to be included in the assessable value, and that only such consideration as received by the service provider are to be included (Paragraph 3).
3 Bharat Coking Coal Ltd v. Facilities to CISF for (i) free residential accommodation, (ii) free Commissioner medical services to the CISF personnel at its premises, (iii) free of vehicles / cabs to CISF personnel, (iv) reimbursement of expenditure Central Excise on petty imprest expenses, medicines and telephone on actual and S.Tax, submission of bills/invoice are not includible in the taxable value. Dhanbad 29 ST/41011/2015 [2021 (9) TMI 23 - CESTAT KOLKATA] 4 CISF v.
Commissioner Whether facilities like accommodation, medical facility, vehicle, of Service Tax, telephone, stationery etc. are to be included in the assessable value Pune-I of services provided by CISF. Held that the facilities are not to be [2021 (11) TMI includible in the assessable value. 835 - CESTAT MUMBAI] 5 Sr. The issue was whether service tax is to be discharged on non-
Commandant, monetary consideration such as free accommodation, medical CISF (BHEL facilities, vehicle and telephone, insurance and stationery and other Unit) v. CCE, expenses for the period April 2009 to March 2012. Following the Bhopal decisions of Intercontinental (supra) and CISF v. CST, Pune (supra), [2023 (4) TMI held in favour of the assesse, and the service tax demand was set 608 - CESTAT aside (paragraph 4).
NEW DELHI] Period involved : April 2009 to March 2012.
6. CISF vs Commissioner Appellants receiving reimbursements for various expenses like of Central Tax, medical expenses, stationery expenses, accommodation and excess Vishakapatnam pension are not subjected to the levy of Service Tax. Reimbursement 2024 (5) TMI expenses are not to be included for arriving at the Service Tax 565 - CESTAT payable.
Hyderabad
7. Commisisoner of CE & ST, The provision of non-monetary facilities which include barrack Rajkot vs accommodation, medical expenses, lease accommodation, telephone Commandant, charges, vehicle and vehicle hiring charges, stationery, dog squad CISF expenses, miscellaneous expenses etc. are not taxable. 2014 (6) TMI 910 - CESTAT AHMEDABAD 8 CISF Vs Comm. CE&ST Charges paid by the Service Recipient for accommodation, medical 2024 (4) TMI Expenses, vehicle running and maintenance, telephone, dog quad etc. 391 - CESTAT are not included in the taxable services. AHMEDABAD 9 The Asst.
Commandant Reimbursement received for the medical expenses, dog squad CISF, CE & ST, expenses etc. are not in the nature of the consideration towards any Shillong of the services paid by the Appellant. 2024 (11) TMI 666 - CESTAT KOLKATA 4.3 She has contended that the consistent view taken by the various Coordinate Benches of the Tribunal, as 30 ST/41011/2015 indicated above have been accepted by the Department as no revenue appeal has been preferred by the Department. In other words, the view taken in the above decisions have attained finality, and it is for this reason, the principles contained therein merits to be applied to the instant case squarely.
4.4 She has put forth that the present appeal merits to be allowed and the demand be set aside following the covered decisions standing in favor of the Assessee, whereby the issue has attained finality. Thus, she has prayed for setting aside the impugned Order-in-Appeal No. 36/2015 dated 19.03.2015.
5.1 The Ld. Authorized Representative Ms. O.M. Reena appeared and argued for the department. The Memorandum of Understanding entered into between the appellant and M/s. SSP was adverted to by the Ld. A.R to submit that it would be clear from the MOU that the appellant has received services in addition to the consideration that has been paid by SSP on invoices raised by them.
5.2 It is submitted that from the MOU itself it is clear that apart from the agreed consideration, the appellant has 31 ST/41011/2015 received various services from SSP which are quantified by the department by adopting notional value; that the appellant ought to have included cost of these services also while arriving at the taxable value for discharge of service tax; and that as per Section 67 (1) (ii), the cost of services provided over and above the amount of consideration has to be included in the taxable value.
5.3 The Ld. A.R submitted that the evasion of tax would not have come to light if the department had not gathered Intelligence that the Appellant have not discharged their Service Tax liability correctly on the Gross Amount received for providing the said Taxable Service to SSP and not furnished correct information in the prescribed Half- Yearly ST-3 Returns in contravention of the provisions of Sections 67, 68 & 70 of the Finance Act, 1994, read with Service Tax Rules, 1994. It was submitted that the following documents / details were suppressed by the Appellant till the date of issuance of letter C.No.IV/06/45/2012 HPU (SIV III) dated 13-07-2012 by the Department to the General Manager, Steel Authority of India Limited, Salem Steel Plant, Salem (SSP) asking the Appellant to furnish the same :-
i) Copy of contract / terms and conditions for engaging the services of CISF;32
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ii) Month-wise details of amount paid to CISF towards salary and allowances, initial clothing and equipment charges, arms and ammunition, leased accommodation, medical expenses, vehicle running and maintenance, telephone, stationery, dog squad, insurance and any other expenses for the period from 01.04.09 to 31.03.12.
5.4 The Ld. Authorized Representative argued that for the above reasons, the invocation of extended period is legal and proper and prayed that the appeal may be dismissed.
6. We have heard both sides and carefully considered the rival submissions, appeal records and case laws relied upon.
7. The main issue that is required to be decided in this appeal is whether the service tax demand confirmed against the Appellant by inclusion of the cost of facilities provided and expenditure incurred by SSP in taxable value is justified or not?
8.1 The demand of differential service tax has been raised on the Appellant by invoking Section 67(1)(ii) of the 33 ST/41011/2015 Finance Act, 1994 and Rule 3(3) of Service Tax (Determination of Value) Rules, 2006 due to alleged non- inclusion of the additional consideration received by them from M/s SSP by way of certain facilities provided to them by SSP as well as by reimbursement of certain expenses incurred by them. It is not in dispute that the appellant has discharged service tax on the consideration received for providing security services. In addition to the said consideration for security services provided by the Appellant, they have also received certain services (facilities) from SSP in the nature of rent-free accommodation, rent free office premises, electricity/water charges, supply of vehicles, supply of fuel, provision of medical treatment, supply of forms and stationery. In the agreement (MOU) between the Appellant and SSP, the cost of these services are not quantified. The Department has raised demand adopting notional value for such services.
8.2 We note that the Tribunal has considered the very same issue in CGST, CCE Dehradun Vs. Commandant CISF Unit (supra). It was held that when there is no evidence forthcoming from the records that the amount of H.R.A. was ever paid to the assessee, the department cannot include the notional value of the free accommodation in the gross value so as to subject it to levy of service tax. The issue of 34 ST/41011/2015 limitation was also held in favour of assesse. The relevant paras read as under: -
"7. To our opinion, consideration received against providing any service, i.e. as per explanation [to] Section 67, is something which include any amount payable for taxable services provided or to be provided. The bare reading makes it clear that in case any amount is payable qua to CISF the accommodation being provided to the security personnels that it shall be the consideration. If it is consideration, then only Rule 3 [of Service Tax (Determination of Value)] Rules will come into picture. But as observed by Commissioner (Appeals) vide the Order under challenge that there is no evidence on the point about any amount either in terms of HRA was ever paid to the respondent/CISF, the question of notional value of the free accommodation provided cannot form part of the gross value which has to be taxed under Section 67 of the Act. We therefore do not find any infirmity in the findings of Order under challenge.
8. Also coming to the aspect of limitation as has been raised by the respondent, we find that the period of demand herein is w.e.f. April, 2009 to June, 2012. SCN is issued on 9-9-2014. It is clear that the entire period of demand is beyond the normal period of one year. The service provider herein is Government undertaking. Service recipient is also a public sector undertaking. There cannot be a single good reason for either of the two to have an intent to evade the tax, there is otherwise no evidence by the Department to prove any positive act on part of the service provider which may amount as mens rea on the part of the provider to evade tax. Rather from the above discussion it is apparent the SCN was issued under notional presumption of free accommodation to be the part of consideration which otherwise was not the liability of the service provider in the given circumstances. Hence, to our opinion, there appears no case of any suppression or mis-representation of facts on part of the service provider (CISF). The Department had no occasion to provisio to Section 73 of the Finance Act, 1994 for invoking the extended period of limitation. Seeing from this angle, SCN is hit by the principle of limitation."35
ST/41011/2015 8.3 Further, the Tribunal in the case of Central Industrial Security Force Vs. CC, C.E. & S.T., Allahabad (supra) considered the very same issue. The facts of the said case reveal that the expenses for medical services, vehicles, telephone charges were incurred by the Airport Authority of India to whom CISF was providing security services. The Tribunal held that such services are in the nature of reimbursable expenses. Following the judgment of Hon'ble Supreme Court in the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 57 - SUPREME COURT], the demand was set aside. 8.4 In the case of M/s. Central Industrial Security Force (CISF) Vs CST Pune (supra) as well as in the case of Sr. Commandant Central Industrial Security Force Vs CC & CE Bhopal (supra), the Tribunal had held the issue in favour of the assessee and set aside the demand. In the present case, the demand has been made in relation to (i) pension from December, 2010, (ii) miscellaneous expenses, (iii) medical facilities, (iv) transportation and (v) cost of accommodation- office and residential. Insofar as (ii) miscellaneous expenses, (iii) medical facilities, (iv) transportation and (cost of accommodation- office and residential are concerned, the same are merely facilities and conditions of contract, and is not forming part of the 36 ST/41011/2015 consideration. Insofar as pension is concerned, there has been no payment made to that effect from December, 2010 and thus will not form part of the aggregate of the gross value charged and hence is not exigible to service tax. Following the above decisions, we are of the view that the demand cannot sustain and requires to be set aside. Ordered accordingly.
9. The Ld. Counsel has argued on the ground of limitation also. The department has alleged suppression of facts with intent to evade payment of service tax. However, there is no positive act of suppression established by the department against the appellant for invoking extended period. Appellant being a Central Para Military Force, we are of the view that invocation of extended period is without basis. The Tribunal in the case of CGST, CCE Dehradun Vs. Commandant CISF Unit (supra) had set aside the demand on the ground of limitation also.
10. After appreciating the facts, evidence and following the decisions cited supra, we hold that the demand cannot sustain. The issue is decided in favour of appellant both on merits as well as on limitation. 37
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11. In the result, the impugned Order-in-Appeal No. 36/2015 dated 19.03.2015 is set aside. The appeal is allowed with consequential relief, if any, as per the law.
(Order pronounced in open court on 03.07.2025) Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO) MEMBER (JUDICIAL) MEMBER (TECHNICAL) MK