Customs, Excise and Gold Tribunal - Delhi
Panther Detective Services vs Commissioner Of C. Ex. on 20 July, 2006
Equivalent citations: [2007]8STT215
ORDER C.N.B. Nair, Member (T)
1. Heard both sides and perused record.
2. The appeals are directed against service tax demands and imposition of penalties.
3. The facts of the cases are that the appellants are providers of security service. That service became liable to service tax with effect from 16th October, 1998. The appellants promptly took registration, made periodic payments of tax and filed returns. For example, the first return was filed by appellant M/s. Panther Security Service in April, 1999. On 11-8-99, revenue issued show cause notice alleging that the service tax was required to be paid on the gross amount received and not on the service charge component alone. Differential duty demand was, accordingly, made. Despite the notice, the appellant continued to value service at the value of service charge. Consequentially under-payment also continued. The impugned orders demand the tax so short-paid from October, 1998 to September, 1999 and impose penalties.
4. The appellants challenged the short-levy demand as well as penalty (@ Rs. 200/- per day). The contention in relation to valuation is that appellant was charging separately for the wage of the security guard, PF, ESI payment and service charge and service tax payable. Today, during the hearing, the learned Counsel has produced before us a sample bill dated 31-3-99 issued to Kothari Products Ltd., Kanpur. We may reproduce that bill:
____________________________________________ RANK DUTY DAYS RATE NOS. AMOUNT ____________________________________________ SECURITY SUPERVISOR 81.00 2336.80 2 7280 SECURITY GUARD 294.00 1733.53 12 19602 ______ 26882 P.F. @ 13.00% 3495 E.S.I. @ 4.75% 1277 SERVICE CHARGE 15.00% 4032 ______ GROSS TOTAL 35686 SERVICE TAX @ 5% ON RS. 4032 202 GRAND TOTAL 35888 (RUPEES THIRTY-FIVE THOUSAND EIGHT HUNDRED AND EIGHTY-EIGHT ONLY) ________________________________________________ The submission of the learned Counsel is that the detective agencies retained only the "service charge at 15%" and therefore, valuation of the service should be at that value. He has also relied on the Trade Notice dated 13-10-98 of the Kanpur Commissionerate.
5. Learned SDR points out that there is no basis for the contention that only "service charge" is to be taken into account for the purpose of valuation of the service. He would contend that the definition of value of taxable service makes it clear that "gross amount charged" is the basis. We may read that definition:
Gross amount charged by such agency from the client for services rendered in connection with the security in any property or person, and includes services of investigation, detection of verification of any fact or activity including services of providing security personnels.
6. The above definition leaves no room for doubt as to what is the value of the security service. It is the "gross amount charged" by the agency from the client for the services rendered in connection with the security. In the present case, security is provided through manual guard. In such a system, the wage of the security guard is the basic cost. The appellant was also charging the recipient of the security service for the cost of security guard as well as PF, ESI payments. In these circumstances, we find no merit in the contention regarding valuation of the service. Trade Notice in question also does not support the appellants' case. That Trade Notice makes it clear that even provision for ESI, PF would not be eligible for deduction.
7. In view of what is stated above, the only relief in regard to valuation that the appellants would be entitled is to treat the total receipts as inclusive of the service tax. We allow the same. It is accordingly ordered that the revenue shall re-compute the tax amounts in these appeals, treating the total receipts as cum-tax. The appellant shall be liable to pay the revised duty amounts so worked out.
8. Coming to the penalty amounts, the contention of the learned Counsel is that in terms of Section 80 of the Finance Act, 1994, no penalty is warranted on the appellants. The contention is that the appellant had been making payment of duty in time and wrong valuation is a bona fide error and such errors are excluded under Section 80 from penalty. We may read that Section:
Notwithstanding anything contained the provision of Sections 76 and 77, Section 78 and Section 79, no penalty shall be imposable on the assessee for any failure referred to in the said provision if the assessee proves that there was no reasonable cause for the said failure.
9. The Section attracted in the present case is Section 76, inasmuch as there was short payment of tax. Short payment of tax has resulted wrong valuation of service. Submission of the learned Counsel is that appellant was under bona fide belief that the value of service rendered was 'service charge' only and that the wages of the guard and supervisor were not includible. We have discussed the trade notice as well the legal provisions regarding valuation. We have already noted that the aforesaid provisions left no room for misunderstanding, as to the basis for valuation. Therefore, we are unable to accept the appellant's contention regarding bona fide mistake. Penalty is clearly attracted. As regards the quantum of penalty, we find that the Larger Bench of this Tribunal has held in the case of ETA Engineering Ltd. v. C.C.E., Chennai that minimum penalty under Section 76 is Rs. 100/- per day. Taking into account all the facts of the case, we reduce the penalty to Rs. 100/- per day. The revenue authority shall compute penalty amount on this basis and intimate the same to the appellants. The appellants shall make payment of the same subject to the ceiling that penalties shall not exceed the differential tax demand.
10. Both the appeals are ordered in the above terms.
(Dictated and pronounced in open Court)