V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;] dsUnzh; mRikn Hkou] jsl dkslZ] fjax jksM jktdksV-360001 CENTRAL EXCISE & CUSTOMS COMMISSIONERATE
CENTRAL EXCISE BHAVAN : RACE COURSE RING ROAD RAJKOT 360 001
Phone – (0281) 2442030, 2441980, 2441982 Fax – (0281) 2443313, 2452967 Email: [email protected] Qk- la- F.No. V.ST/15-218/Adj/09
By RPAD/HAND DELIVERY
vkns”k dh rkjh[k Date of order
17.05.2012 ewy vkns”k la- ORDER IN ORIGINAL NO.33/COMMR/2012 tkjh djus dh rkjh[k
Date of Issue 17.05.2012
vkns”kdrkZ Ordered by
ch- ds- caly vk;qDr
ds-m-“kq- vk;qDrky; jktdksV B. K. Bansal
Commissioner, Customs & Central Excise,
Rajkot. ds lanHkZ esa In the case of
M/s. Tops Security Limited, B-202, Pooja Complex, Near GPO Harihar Chowk, Rajkot-360001 (Now at: A-40, Aalap Avenue, Opp Radhe Hall, Nr. SNK School, University Road, Rajkot-360 005)
dkj.k crkvks la- ,oa frfFk Show Cause Notice No. & Date
No.V.ST/AR-I/RJT/RJT/COMMR/217/09 dated 23.10.2009
1. जस य (य ) को यह ित भेजी जाती है, उसे य गत योग के िलए िनःशु क दान क जाती है।
This copy is granted free of charge for private use of the person(s) to whom it is sent.
2. इस आदेश से असंतु कोई भी य इस आदेश क ाि से तीन माह के भीतर सीमा शु क, उ पाद शु क एवं सेवाकर अपीलीय यायािधकरण, अहमदाबाद पीठ को इस आदेश के व अपील कर सकता है। अपील सहायक र ज ार, सीमा शु क, उ पाद शु क एवं सेवाकर अपीलीय यायािधकरण,O-20, मेघाणीनगर, यु मे टल हॉ पीटल क पाउ ड, अहमदाबाद-380 016 को स बोिधत होनी चा हए। Any person deeming himself aggrieved by this Order may appeal against this Order to the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad Bench within three months from the date of its communication. The appeal must be addressed to the Assistant Registrar, Customs, Excise and Service Tax Appellate Tribunal, O-20, Meghani Nagar, New Mental Hospital Compound, Ahmedabad-380 016.
3. उ अपील स वस टे स स, १९९४ के िनयम 9(1) के देहत ा प सं. एस.ट .5 म दा खल क जानी चा हए। उसपर के य उ पद शु क (अपील) िनयमावली, 2001 के िनयम 3 के उप य य ारा ह ता र कए जाएंगे। उ अपील को चार ितय म दा खल कया जाए तथा जस आदेश के व अपील क गई हो, उसक भी उतनी ह ितयाँ संल न क जाएँ
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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(उनम से कम से कम एक ित मा णत होनी चा हए)। अपील से स बंिधत सभी द तावेज भी चार ितय म अ े षत कए जाने चा हए। The Appeal should be filed in form No. S.T.-5 specified in rule 9(1) of Service Tax Rules, 1994. It shall be filed in quadruplicate and shall be accompanied by an equal number of copies of the order appealed against (one of which at least shall be certified copy). All supporting documents of the appeal should be forwarded in quadruplicate. 4. अपील जसम त य का ववरण एवं अपील के आधार शािमल ह, चार ितय म दा खल क जाएगी तथा उसके साथ जस आदेश के व अपील क गई हो, उसक भी उतनी ह ितयाँ संलगन क जाएंगी (उनम से कम से कम एक मा णत ित होगी)।
The Appeal including the statement of facts and the grounds of appeal shall be filed in quadruplicate and shall be accompanied by an equal number of copies of the order appealed against (one of which at least shall be a certified copy.)
5. अपील का प अं ेजी अथवा ह द म होगा एवं इसे सं एवं कसी तक अथवा ववरण के बना अपील के कारण के प शीष के अंतगत तैयार करना चा हए एवं ऐसे कारण को मानुसार मां कत करना चा हए। The form of appeal shall be in English or Hindi and should be set forth concisely and under distinct heads of the grounds of appeals without any argument or narrative and such grounds should be numbered consecutively.
6. अिधिनयम क धारा 35 बी के उपब ध के अंतगत िनधा रत फ स जस थान पर पीठ थत है, वहां के कसी भी रा ीयकृत बक क शाखा से यायािधकरण क पीठ के सहायक
र ज ार के नाम पर रेखां कत माँग ा ट के ज रए अदा क जाएगी तथा यह माँग ा ट अपील के प के साथ संल न कया जाएगा। The prescribed fee under the provisions of Section 35 B of the Act shall be paid through a crossed demand draft, in favour of the Assistant Registrar of the Bench of the Tribunal, of a branch of any Nationalized Bank located at the place where the Bench is situated and the demand draft shall be attached to the form of appeal.
7. यायालय शु क अिधिनयम, 1970 क अनुसूची-1, मद 6 के अंतगत िनधा रत कए अनुसार संल न कए गए आदेश क ित पर 5.00 पया का यायालय शु क टकट लगा होना चा हए। The copy of this order attached therein should bear a court fee stamp of Re. 1.00 as prescribed under Schedule 1, Item 6 of the Court Fees Act, 1970. 8. अपील पर भी . 5.00 का यायालय शु क टकट लगा होना चा हए। Appeal should also bear a court fee stamp of Rs. 5.00.
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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BRIEF FACTS OF THE CASE:
M/s. Tops Security Limited, having their head office and
registered office at 5, Royal Palms Golf & Country Club, Aarey Milk Colony,
Goregaon ( E), Mumbai-400065 and having status of a limited company,
(hereinafter referred to as the “Company”) are engaged in the business of
providing Security Services to various clients all over India and the security
services provided by them are chargeable to Service Tax under 'Security
Agency Services' as defined under Section 65(94) of the Finance Act, 1994
(hereinafter referred to as the “Act”). They are providing security services
through the network of branches which are controlled by its head office at
Mumbai and their all the branches are separately registered with the
jurisdictional Central Excise/Service Tax Offices for the purpose of
discharging of the Service Tax liability at various places in India. One such
their branch viz. M/s. Tops Security Limited, B-202, Pooja Complex, Near
GPO Harihar Chowk, Rajkot-360001 (hereinafter referred to as the
“Noticee”) are holding Service Tax registration No.AAACT0160FST009 from
the Central Excise Commissionerate, Rajkot.
2. On the basis of intelligence gathered by the Directorate General
of Central Excise Intelligence, Ahmedabad Zonal (for short, DGCEI) that the
branches of the Company, located in Gujarat had not discharged their
Service Tax liability properly, enquiries conducted with their said branches
revealed that due Service Tax was not being deposited by them.
3/- The Managing Director of the Company was issued with various
summons and in response to such summons, Shri Rahul Nanda authorized
different officials who gave different versions of the tax liability and the
Service Tax liability discharged by the Company.
4/- In response to summons, Shri Diwan Rahul Nanda, Global
Chairman and Managing Director of the Company appeared alongwith two
officials of the company viz. Shri Amar Panghal, Chief Financial Officer and
Shri Mukesh Jain, Corporate Manager(Taxation), who were stated to be for
helping him in providing the necessary details to DGCEI, and in his
statement dated 17.04.2009 (in questionnaire form) recorded under Section
14 of the Central Excise Act, 1994 as made applicable to Service Tax by
virtue of Section 83 of the Act, he stated as under:
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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“Q.1. Please provide information about M/s Tops Security Limited, in which
you are acting as Global Chairman and Managing Director, viz its formation,
promoters, equity holders, other directors, its business, its incorporation.
Ans. M/s Tops Security Limited is having its registered and corporate office
at Mumbai. It was established in 1982 and was previously known as Tops
Detectives & Security Services Private Limited. The company was incorporated
as a company in 1995. The promoters of the company are my father Major R.C.
Nanda, and Myself.
Q.2. How the decisions are taken in the company?
Ans- The major policy decisions are taken by the board of directors and Indian
operations are handled by Shri Ramesh Iyer, Executive Director of the company.
Q.3. What is the accounting policy of the company?
Ans- The accounting of the company is de-centralized. The business of the
company is generated at the branch level, bills to the clients are generated at
the branch level. The revenue is deposited in the centralized account of the
company with the corporation bank. At the branch level trial balance is
generated. On the basis of trial balance, region wise balance sheets are
prepared. M/s Tops Security Limited is divided into following regions :- (i)
Central India Region, (ii) East India Region, (iii) Central Mumbai Region, (iv)
Mumbai western Region, (v) Western Region, (vi) Maharashtra Region, (vii)
North India Region, (viii) Punjab & East India Region, (ix) South India region.
On the basis of regional balance sheet consolidated annual report is prepared.
Q 4. The services provided by a security agency were brought under the purview
of Service Tax with effect from 16.10.1998. As per Section 65 (94) of the
Finance Act, 1994, the security agency is defined as under:
"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 the services of providing security personnel".
Various branches of M/s Tops Security Limited are registered with
Service Tax department for providing Security Services. What do you know
about Service Tax and its various provisions?
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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Ans- I state that our company is dealing with the Service Tax since its inception.
M/s. Tops Security Limited is engaged in the business of providing security
services on commercial scale. M/s Tops are rendering security to the properties
of their clients by way of providing trained security personnel. Therefore, M/s.
Tops is a security agency within the meaning of Section 65(94) of the Finance
Act, 1994. Therefore, the payments received by M/s. Tops from their clients in
respect of security services provided by them will be chargeable to Service Tax.
I also understand that as per the provisions of Section 67 of the Finance Act,
1994, the gross amount charged by the security agency from the service
recipient for rendering service is the taxable value. Thus abatements towards
administrative and office expenses incurred for rendering such services are not
allowed from the gross amount charged in respect of such service. I also
understand that every person providing taxable service to any person shall pay
Service Tax at the specified rate to the credit of the Central Government, by the
5th of the month, in which the payments are received, towards the value of
taxable services provided to the clients. I also understands that that every
person liable to pay the Service Tax shall himself assess the tax due on the
services provided by him and shall furnish to the Superintendent of Central
Excise, a half-yearly return in Form ST-3 along with a copy of the Form TR-6, in
triplicate for the months covered in the half-yearly returns. The half yearly
return is to be filed by the 25th of the month following that particular half-year.
Q.5. Whether any administrative set up has been made for fulfilling the
above provisions of law by you as a Chairman and Managing Director of the
company?
Ans- M/s Tops Security Limited had formulated a policy that Service Tax is
to be deposited at the branch where the bills are raised to the client. Thus our
branches were got registered with the local Central Excise/ Service Tax offices.
At the end of the month, these branches were to calculate Service Tax, and
were required to forward a cheque to the registered office, where it was passed
and was sent back to the branch office for deposit to the credit of central govt.
Q.6. Now your attention is drawn to the first summons dated 11.07.2007
along with letter dated 11.07.2007 wherein you were informed that Service Tax
though being collected from the clients is not being deposited by M/s Tops
Security Limited, please state what efforts have been taken by you to correct
the wrong practice and to deposit the entire amount of Service Tax so collected?
Ans- We have brought current Service Tax payments on track and we are in
compliance till March, 2009. As regards the old outstanding is concerned, we
have in addition paid five crores as was committed to this office. Remaining
Service Tax will be paid shortly.
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Q.7. How is Service Tax element reflected in the annual reports and is it
possible to figure out the total Service Tax which should have been deposited to
the credit of Central govt. in a financial year?
Ans- M/s Tops have been receiving the payments from their clients, at the
branch level. For this purpose, M/s. Tops have been raising bills to their clients
at the branch level and trial balance is generated at the branch level. On the
basis of these trial balances, Annual Audit Reports are prepared. The value of
security services [billed amount] provided by M/s. Tops are shown in the Annual
Reports, however the actual collection of Service Tax is not shown in the Annual
Reports.
I state that the collection amount can be ascertained from the billed
amount by simple calculation. Out of the billed amount of Security Agency
Service, the amount which has not been received in the current year, is
reflected under the heading "Sundry Debtors". However, the amount of sundry
debtors which is relating to the clients is to be considered as not received in the
year for the purpose of Service Tax [i.e. the amount of sundry debtors which is
relating to Security Agency Service is not to be considered]. The amount
reflected under the heading "Sundry Debtors" of the previous year is carried
forward to the current year. Therefore, the amount received in the current year
will be as under:
Amount received in the current year = Billed amount of security agency service
[minus] amount of sundry debtors relating to the clients of the current year
[plus] amount of sundry debtors relating to the clients of previous year. The
amount related to bad debts which are written off are also not to be considered
for arriving at the amount received during the current year for which
adjustments are to be made.
Q.8. As per the above formulae, Shri Amar Panghal and Shri Mukesh Jain
tried to work out the quantum of Service Tax which should have been deposited
by M/s Tops Security Limited during the year 2004-05, 2005-06, 2006-07 and
2007-08, the same is as under:-
A
A
Year Sum of the Gross
billing for the
year
Sum of collection
for the year
Service Tax payable
2004-05 1268269054 1180344021 100650512
2005-06 1622013756 1345172113 124507764 2006-07 2401642790 2071098262 214004477
2007-08 2595527241 2732361804 263447236
7887452841 7328976200 702609989
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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As per above an amount of Rs.70,26,09,989/- was to be deposited by
M/s Tops Security Limited ? Please state as to how much amount of the above
has been deposited by your company?
Ans- I herewith produce four sheets which show the computation of Service
Tax liability and payment of Service Tax for the year 2004-05, 2005-06, 2006-
07 and 2007-08. The Service Tax liable to be paid on 31st March, 2008 is to the
tune of Rs. 23,99,29,816/-, out of which some more payments have been made
during the year 2008-09, the details will be submitted shortly. For the purpose
of further details I authorize, Shri Amar Panghal, Chief Financial Officer, of M/s
Tops Security Limited, Mumbai and Shri Mukesh Jain, Corporate Manager
(Taxation), M/s Tops Security Limited, Mumbai, the information provided by
them will be binding on the company.
Q.9. You are shown an e-mail written by Shri Abhaya Gandhi, General
Manager Finance of the company to branch heads in which he had stated that
Service Tax payments from April, 2008 onwards will be paid at headquarter
level. Please comment on the manner of discharge of Service Tax liability after,
April, 2008 to till date.
Ans- I state that though we have taken a centralized Service Tax registration
with Mumbai Service Tax Commissionerate, however we are paying/ depositing
Service Tax at the branch level only , as No objection certificate from the
jurisdictional central Excise offices could not be obtained. The Service Tax
payment will be made by us at the branch level only, for which 35 offices have
been nominated.
Q.10. Why the Service Tax being collected by your company is not still
deposited to the exchequer on due dates?
Ans- The Service Tax compliance after the 2005-06 was delayed, due to
rotation of funds. The due Service Tax is being deposited after investigation by
DGCEI.
Q.11. You are hereby informed that a bailable warrant issued by Additional
Chief Metropolitan Magistrate, Ahmedabad in Criminal case No. 235 of 2008 is
pending to be served upon you. Please Comment.
Ans- I am aware of the same and has been informed of the same by my
staff.”
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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5/- The Company vide their letter dated 12.06.2009 further
submitted that the Service Tax calculation sheets provided by them on
17.04.2009 had some error and again submitted certified statement from
2004-05 to 2007-08 as per audited balance Sheet, containing summary of
their business conducted from different branches, collection and Service Tax
payable, paid and Service Tax pending to be deposited. The summary of the
same for the entire transactions of the Company has been tabulated as
below:-
Table-I
(Amount in Rs.)
Year Net Collection during the year
Service Tax payable for the year
Service tax payable in the beginning of the year
Service tax deposited during the year as reported by the Company
CENVAT claimed
Balance payable at the end of the year
2004-05 1184777934 108534814 21991663 80878787 32649 49,615,041
2005-06 1381537958 122512644 49615041 107736874 509737 34,703,458
2006-07 2143323399 220776449 34703458 122113708 8124971 125,965,400
2007-08 2778089330 286586177 125965400 167371431 2544515 239,929,814
Total 7487728621 738410084 478100800 11211872 Note :- During the year 2005-06, a sum of Rs.3,11,59,261/- was claimed towards Service Tax not accrued, which appeared to be incorrect hence, the Service Tax payable at the end of 2007-08 should be Rs.27,10,89,075/-
6/- Investigations for the company as a whole had revealed that the
Company had been providing security agency services to its various clients,
through its 44 accounting branches located at various places and they had
opted to be separately registered for payment of Service Tax at 35 places.
The Company had been issuing bills normally on monthly basis in respect of
security services provided by them.
6.1/- During investigations, several summons were issued to the
Company for providing details relating to security services provided by them.
However, the Company, every time authorized a person, who was new to
the company, and the details produced by them were incomplete and
incorrect. Even the information produced by their Managing Director during
recording of his statement on 17.04.2009, was subsequently corrected vide
their letter dated 12.06.2009 referred supra. The details produced by them
together with the details available in the audited Annual Audit Reports for
the years ended on 31.03.2005, 31.03.2006 & 31.03.2007 and 31.3.2008
along with the Service Tax calculation sheets produced by Shri Amar
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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Panghal, Chief Financial officer of the Company had been relied for
computation of Service Tax on the security services provided by them.
6.2/- It further revealed that the Company had been charging Service
Tax from their customers, and the amount received by them was inclusive of
Service Tax. The payment was received at the branch level which was
deposited in their centralized account in the Corporation Bank. The amount
related to services rendered was reflected in their books of account.
However, the Service Tax paid by them during the corresponding period did
not commensurate with the amount received by them in respect of security
services provided by them. The summary in para 5 supra showed that
Service Tax of Rs.73,84,10,084/- + Rs.2,19,91,663/- = Rs.76,04,01,747/-
was to be deposited by them during the period 2004-05 to 2007-08. As per
their own submission Service Tax of Rs. 23,99,29,814/- was unpaid at
the end of March, 2008. They had submitted that Service Tax of
Rs.47,81,00,800/- had been deposited during 01.04.2004 to 31.03.2008 but
the same could not be tallied with the reports called for by DGCEI from the
jurisdictional Central Excise Offices, as the Company had not filed ST-3
returns. Thus, the Company were required to produce the proof of the
payments made by them before the adjudicating authority.
6.3/- They Company were registered at different places and were
required to file ST-3 returns to the department, however no such returns
had been filed with the jurisdictional Central Excise/Service Tax offices
within the due date.
7.1/- Investigation in respect of the Noticee revealed that the Noticee
had obtained Service Tax Registration No.AAACT0160FST009. The Company
vide their letter dated 12.06.2009 had submitted the sheets showing
computation of Service Tax for their various branches, however, it appeared
that the rate of Service Tax had not been correctly applied while computing
the total service tax liability. Therefore, after applying the correct rate of
Service Tax, Education Cess and Secondary & Higher Education Cess, the
year-wise summary of Service Tax payable in respect of the Noticee
appeared to be as under:-
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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Table-II
(Amount in Rs.)
Year Net Collection during the year
Service Tax payable for the year
Service Tax payable in the beginning of the year
Service Tax deposited during the year as reported by the Company
CENVA T claimed
Short payment of Service Tax
2004-05 2262386 230763 49692 155147 125308
2005-06 4755011 485011 125308 321194 289125
2006-07 16308251 1996130 289125 364088 1921167
2007-08 22277904 2753549 1921167 963523 828 3710365
Total 45603552 5465453 1803952 Rate of Service Tax 2004-05 (upto 10.09.2004) : 8% 10.09.2004 to 17.04.2006 : 10% + 2% E.C. 18.04.2006 to 10.05.2007 : 12% + 2% E.C. 11.05.2007 to 23.02.2009 : 12% + 2% E.C. + 1% S & H.E. Cess
It appeared from the above summary that, for the period from
year 2004-05 to 2007-08, Service Tax of Rs.55,15,145/- (Rs.49,692/- +
Rs.54,65,453/-) was to be paid by them for the security services provided
by the Noticee for which they have obtained Service Tax registration at
Rajkot. The Company however claimed that they had deposited Service Tax
of Rs.18,03,952/- during the said period.
7.2/- Further, on being asked by the JRO vide letter F.NO.
SA/RAJKOT-1/20/TD&SS dated 16.07.2009 and 28.07.2009, the Noticee had
filed the ST-3 returns due for the period October, 2005 onwards upto March,
2009. During the scrutiny of the ST-3 return for the periods mentioned
below, it appeared that there was a short payment of Service Tax of
Rs.18,76,684/- as under:
Table-III
Period Value of Service
(Rs.)
Amount of Service Tax
payable (Rs.)
Amount of Service
paid (Rs.)
Amount of Service
Tax to be recovered
(Rs.)
Short Payment of Interest
Apr. to Sept-2008-09
8064450/- 996766/- 0 996766/- Rs. 996766/-to be recovered with interest
Oct. to Mar., 2008-09
9274283/- 1146301/- 266383/- 879918/- Rs. 879918/- to be recovered with interest
Total 17338733/- 2143067/- 266383/- 1876684/-
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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It further appeared that an amount of Service Tax of
Rs.2,66,383/- paid against the total liability of Rs.11,46,301/- for the period
October, 2008 to March, 2009 was paid in three installments beyond the due
date, and after delay of 36 days, 66 days and 36 days, respectively.
Therefore, there appeared short payment of interest of Rs.4053/- which was
required to be recovered from the Noticee under Section 75 of the Act.
8/- As provided by Section 68 of the Act, ‘every person providing
taxable service to any person shall pay Service Tax at the specified rates
and in such manner and within such period as may be prescribed’. Further,
Rule 6 of the Service Tax Rules, 1994 (hereinafter referred to as the “Rules”)
stipulated that ‘Service Tax shall be paid to the credit of the Central
Government, by the 5th of the quarter immediately following the calendar
month, in which the payments are received, towards the value of taxable
services’. Section 70 of the Act provided that ‘every person liable to pay the
Service Tax shall himself assess the tax due on the services provided by him
and shall furnish to the Superintendent of Central Excise, a return in such
form and in such manner and at such frequency as may be prescribed’.
Further, Rule 7 of the Rules prescribed that ‘every assessee shall submit a
half-yearly return in Form ST-3 or ST-3A as the case may be, along with a
copy of the Form TR-6, in triplicate for the months covered in the half-yearly
returns’. Further sub-rule [2] thereto also stated that ‘every assessee shall
submit the half yearly return by the 25th of the month following the
particular half-year’.
9/- It appeared that the Noticee had been providing the security
agency services to various clients and had obtained service tax registration
for the said taxable service but they had not been filing the periodical ST-3
Returns. It, therefore, appeared that they had deliberately not declared the
correct value of the said service in their ST-3 returns with the intention of
evading the payment of Service Tax. The Noticee had thus contravened the
provisions of Section 68 of the Act read with Rule 6 of the Service Tax
Rules, 1994, in as much as they had failed to make the payment of Service
Tax to the credit of the Government, and the provisions of Section 70 of the
Act read with Rule 7 of the Rules, in as much as they had not declared the
correct value of taxable service in their periodical ST-3 Returns.
10/- It appeared that the Noticee had short paid Service Tax by way
of willful mis-statement, suppression of facts and in contravention of
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 12 of 31
provisions of the Act/Rules relating to levy and collection of Service Tax with
an 'intent' to evade the payment of Service Tax. They intentionally did not
declare the proper value of such services in their ST-3 returns. Therefore,
the proviso to sub-section (1) of Section 73 read with Section 73A of the Act
appeared to be applicable to invoke the extended period of five years for the
recovery of Service Tax not paid. Since the Noticee had not paid the Service
Tax, therefore, they appeared to be liable for penal action under Section 76
of the Act. Further, they had not paid Service Tax even after collection of the
same from the service receivers by way of willful mis-statement,
suppression of facts and contravention of provisions of Act/Rules relating to
levy and collection of Service Tax with intent to evade Service Tax and
therefore, they appeared to be liable to penal action under Section 78 of the
Act.
11/- Shri Diwan Rahul Nanda, Chairman and Managing Director of the
Noticee was fully aware that they were providing taxable service and were
collecting Service Tax from their clients but were not depositing the same to
the Govt. Account. Shri Diwan Rahul Nanda was the persons in charge of the
Company when the said offence of evasion of Service Tax was committed by
the Noticee and was responsible for the conduct of the business of the
Company and Noticee. Therefore, he appeared to be liable to penal action
under Section 77 of the Act for not taking appropriate action to deposit the
Service Tax even though the same was being collected by them from their
clients, not filing Service Tax returns and not paying Service Tax by way of
fraud, willful mis-statement, suppression of facts and contravention of
provisions of the Act/Rules with an intent to evade payment of Service Tax.
12/- Hence, a Show Cause Notice No.V.ST/AR-
I/RJT/RJT/COMMR/217/09 dated 23.10.2009 was issued to the Noticee,
asking them to show cause to the Commissioner of Central Excise, Rajkot,
as to why:
(i) The Service Tax amounting to Rs.73,91,829/- (Rs.55,15,145/-+
18,76,684/-) (Rupees seventy three lakhs ninety one thousand
eight hundred twenty nine only ) should not be demanded and
recovered from them under proviso to sub-section (1) of Section
73 of the Act read with Section 73A ibid;
(ii) Interest for Rs.4,053/- for delayed payment of Service Tax,
should not be demanded and recovered from them under Section
75 of the Act;
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 13 of 31
(iii) Interest at appropriate rate for delayed payment of Service Tax,
should not be demanded and recovered from them under Section
75 of the Act;
(iv) Penalty should not be imposed upon them under Sections 76 &
78 of the Act for contraventions mentioned in foregoing paras.
13/- Further, vide the said show cause notice followed by
corrigendum dated 16.04.2012, Shri Diwan Rahul Nanda, Chairman and
Managing Director of the Company was also called upon to show cause to
the Commissioner of Central Excise, Rajkot, as to why penalty should not be
imposed upon him under Section 77 of the Act.
DEFENCE AND PERSONAL HEARING:
14/- The Noticee, vide written submissions dated 27.10.2009 and
28.03.2011 while denying all the allegation raised in the show cause notice
made the following submissions:
15/- The Noticee submitted that they were limited company having
branch office at A-40, Aalap Avenue, Opp Radhe Hall, Nr. SNK School,
University Road, Rajkot-360 005 and head office and registered office at
5, Royal Palms golf & Country club, Aarey Milk Colony, Goregaon (E)
Mumbai 400 065 and were engaged in providing taxable services under
category ‘Security Agency Service’ and holding Service Tax registration
no.AAACT0160FST009. They submitted that periodical ST-3 Returns had
been filed up to date and the last such return for the half year ended
31.03.2009 was submitted on 31.08.2009.
16/- The Noticee contended that as per data provided in the
notice i.e. Table-II & III given hereinabove, the amount of collection of
service was inclusive of amount of Service Tax and to work out tax
liability the amount of Service Tax should be deducted from the total
amount of collection. Further, verification and scrutinization of the
Noticee’s records of the relevant period such as Bank Statement, books
of Account and Balance sheet and Profit & Loss A/c, showed as under:
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 14 of 31
Table-IV
(Amount in Rs.)
Year Collection As per
account (Including
S. Tax)
As per ST-3 Difference S. Tax
Payable S. Tax Paid
Balance payable
Remarks
2004-05 2262386
Less S. Tax -197692
2064694 2009770 -54924 197692 188652 9040
2005-06 4755011
Less S. tax -440119
4314892 4138688 -176204 440119 422146 17973
2006-07 16308251
Bad Debt -1375868
Net collection 14932383
Less S. tax -1628406
13303977 15559660 2255683 1628406 1894494 -266088 Excess
2007-08 22277904
Bad Debt -4765515
Net collection 17512389
Less S. tax -1926425
15585964 15069242 -516700 1926425 1859450 66975
2008-09 17338733 17338733 NIL 2143067 337258 1805809
Total 54116093 1507855 6335709 4702000 1633709
They contended that it was cleared from the above table that
during financial year 2004-05 to 2007-08, the Noticee had deposited
Service Tax as per the collection received from the customer. They
further contended that during financial year 2008-09, the Noticee had
deposited Rs.3,37,258/- as against Service Tax payable Rs.21,43,067/-
and balance Service Tax payable was Rs.18,05,809/-, which was shown as
unpaid amount in relevant period of ST-3 without any malafied intension,
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 15 of 31
due to financial problem and the same would be deposited by the them
within the short period.
17/- Further, they inter alia submitted that the levy of the Service
Tax was new for the Noticee; that no proper advice was available for
Rules and Regulation of Service Tax and taxability of Service Tax; that
accountant, who looked after the accounts and service tax matter, had
left the office since long; that no one was aware of the correct
procedure to be followed for the payment of Service Tax as well as
filling of return; that there was no malafide intention for non-payment of
Service Tax in the light of the provision of Section 80 of the Act.
18/- They contended that since ST-3 Returns were filed showing
correct value of security agency services, hence, there was neither willful
mis-statement nor suppression of facts and thus, there was no deliberate
intention of evading the Service Tax. The Noticee further submitted that they
had made payment of Service Tax as per the provisions of Section 68 of the
Act read with Rule 6 of the Rules subject to availability of the funds and had
also filed ST-3 returns upto 31.03.2009, with the late fee of Rs.2,000/- for
delayed furnishing of return, as required under Section 70 of the Act read
with Rule 7 of the Rules, and that they were willing to make the balance
payment of Service Tax with interest thereon as per Service Tax Returns
in form ST-3 filed up to 31-03-2009. They also submitted that due to financial
crisis, there were delayed in payment of Service Tax without willful mis-
statement and suppression of facts, relating to levy and collection of
Service Tax, and without intention to evade the Service Tax, and therefore,
proviso to sub-section (1) of Section 73 of the Act should not be made
applicable to invoke the extended period of 5 years for recovery of Service
Tax. They requested to take lenient view and not to initiate penalty
proceedings under Section 76 & 78 of the Act. They contended that since
they had taken registration, maintained books of accounts and records in
accordance with the provision of the Act, furnished the information called
for as when required and produce the document called for, appeared in
person before the prescribed authorities as when summons are received,
issued service invoices in accordance with the provisions of act, therefore,
penalty under Section 77 of the Act should not be imposed upon them.
They further argued that Shri Rahul Nanda was not the compliance officer
of the Noticee under the Act and hence, he was not liable for penalty under
Section 77 of the Act.
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 16 of 31
19/- During the personal hearing in the matter held on 22.03.2011,
the Noticee’s representatives namely S/Shri Jayram Desai and Shailesh
Dodiya, C.A., appeared and sought adjournment in the matter by stating
that they had not been able to reconcile the demand amount with what was
already paid by them and accordingly, the case was posted for hearing on
28.03.2011. During further personal hearing held on 28.03.2011, S/Shri
Jayram Desai and Digvijay Chudasama, representatives of the Notice,
appeared and submitted that they had submitted separately a letter dated
28.03.2011 in reply to the notice and in their view, only an amount of
Rs.16,33,709/- was remained to be paid by them, which they would pay at
the earliest. During the personal hearing in the matter held on 17.01.2012,
S/Shri S. M. Dodiya and Jayram Desai appeared on behalf of the Noticee and
reiterated the contents of their written submission dated 28.03.2011 already
placed on record. Further, during personal hearing held on 16.05.2012 in
view of corrigendum dated 16.04.2012 to the show cause notice, Shri S. M.
Dodiya appeared on behalf of Shri Diwan Rahul Nanda, Chairman &
Managing Director of M/s. Tops Security Limited and reiterated the contents
of their written submission dated 27.10.2009 already placed on record.
DISCUSSION AND FINDINGS:
20/- I have carefully gone through the facts of the case and the
written and oral submissions made by the Noticee.
21/- The allegations against the Noticee and their counter
submissions against the allegations are discussed in detail in the foregoing
paragraphs. In short the issue to be decided in this case is whether amount
of Service Tax is payable by the Noticee under the service categories of
‘Security Agency Service’ as defined in Section 65 (94) readwith Section
65(105)(w) of the Act, with interest and consequential penalty as proposed
in the show cause notice.
22/- As per the show cause notice, inquiry conducted on the basis of
intelligence inter-alia revealed that the Company i.e. M/s. Tops Security
Limited were engaged in providing security services to various clients
through the network of their branches which were controlled by its head
office at Mumbai and their all such branches, including the Noticee, were
separately registered with the jurisdictional Central Excise/Service Tax
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 17 of 31
Offices for the purpose of discharging of their Service Tax liability at
respective places; that the Company was having de-centralized accounting
system and the business of the Company and bills to the clients were
generated at branch level, however the revenue collected at branch level
was being deposited in the centralized account of the Company; that the
annual report of the Company was consolidated of the region wise balance
sheets which were prepared on the basis of trial balance generated at
branch level; that the Service Tax was to be deposited at the branch level
where the bills were raised to the clients; that the Company had been
charging Service Tax from their customers/clients, and the amount received
by them was inclusive of Service Tax; that they were required to file ST-3
returns with jurisdictional authority but no such returns had been filed by
them within the due date; that the Noticee being branch of the Company
had been providing security services and was accordingly holding Service
Tax registration under the taxable service category of ‘Security Agency
Service’ but they had not been filing the periodical ST-3 returns, however,
subsequently on being asked by the jurisdictional Range Officer, they filed
said returns due for the relevant period; that the Noticee had also made
short payment of interest of Rs.4,053/- on delayed payment of Service Tax
during 2008-09; that though the Noticee had charged and collected Service
Tax but they appeared to have short-paid/not-paid Service Tax amounting to
Rs.73,91,829/- for the said services provided by them during the relevant
period by way of willful mis-statement, suppression of facts and in
contravention of provisions of the Act/Rules with intent to evade the
payment of Service Tax, which has been proposed to be recovered from
them by invoking extended period under proviso to sub-section (1) of
Section 73 read with Section 73A of the Act along with interest under
Section 75 ibid with consequential penalty under Section 76 & 78 ibid.
23/- The Noticee inter alia contended that they had made payment of
Service Tax as per the provisions of the Act/Rules subject to availability of
the funds and had also filed ST-3 returns declaring correct value of the
services for the relevant period, with the late fee for delayed furnishing of
return, as required under the law; that the amount of collection of service
was inclusive of amount of Service Tax and according to them there
was short payment of Service Tax of Rs.16,33,709/- which would be
paid with interest by them shortly; that due to financial crisis, there were
delayed in payment of Service Tax but there was no malafide intention for
non-payment of Service Tax, therefore, proviso to sub-section (1) of
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 18 of 31
Section 73 of the Act should not be made applicable to invoke the
extended period for recovery of Service Tax and accordingly, no penalty
should be imposed under Section 76, 77 & 78 of the Act.
24/- As regards the allegations against the Noticee and their counter
submissions against the allegations, on going through the case records and
as admitted by Shri Diwan Rahul Nanda, Global Chairman and Managing
Director of the Company in his statement dated 17.04.2009, it is observed
that the Company have been engaged in providing security services to the
properties of their clients by way of providing trained security personnel
through the network of its branches, including the Noticee, which were
controlled by its head office at Mumbai and their all the branches were
separately registered with the jurisdictional Central Excise/Service Tax
Offices for the purpose of discharging of the Service Tax liability at their
respective places.
25/- Further, as stated by Shri Diwan Rahul Nanda, Global Chairman
and Managing Director of the Company, it is also observed that the
Company was having de-centralized accounting system and the business of
the Company and bills to the clients were generated at branch level,
however the revenue collected by the branches was being deposited in the
centralized account of the Company and the annual report of the Company
was prepared on the basis of trial balance generated at branch level. It is
also a fact that the branches of the Company being holder of service tax
registration separately were charging Service Tax from their
customers/clients by raising bills to them for providing the services i.e.
security service, and accordingly, the Service Tax was required to be
deposited with Central Govt. account at their respective jurisdiction and
therefore, they were required to file ST-3 returns with jurisdictional
authority. In view of the above, the Noticee being branch of the Company
have been providing security services and were accordingly holding Service
Tax registration under the taxable service category of ‘Security Agency
Service’.
26/- The Noticee have claimed that they had filed ST-3 returns for the
relevant period and according to them they had received total amount of
Rs.5,68,00,902/- (inclusive of amount of Service Tax) towards value of the
taxable services provided by them and had already paid Service Tax of
Rs.47,02,000/- on the said value, however as per their own submission
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 19 of 31
Service Tax of Rs.16,33,709/- was remained to be paid at the end of March,
2009 which was shown in the relevant ST-3 return. On verification of these
contentions of the Noticee with ST-3 returns, as reported by the
jurisdictional Assistant/Deputy Commissioner of Service Tax Division, Rajkot
vide his letters F.No.IV/15-180/ST/ADJ/2009 dated 08.04.2011 &
09.05.2011 and also appearing from the relevant ST-3 returns, the details
are found as per Table-V given below:
Table-V
(Amount in Rs.)
Period
Date of filing
of ST-3
return
Value of
taxable
service
Service
Tax
payable
Service
Tax paid
Service Tax to
be paid
1st Half 25.10.2004 2004-05
2nd Half 25.04.2005
1856921 171500 188652 Excess payment
17152
1st Half 21.11.2005 2005-06
2nd Half 31.08.2009
4138688 422146 384410 37736
1st Half 31.08.2009 2006-07
2nd Half 21.07.2009
15559660 1894493 1894494 Excess payment
1
1st Half 21.07.2009 2007-08
2nd Half 21.07.2009
15069242 1860276 1859450 826
1st Half 31.08.2009 2008-09
2nd Half 31.08.2009
17338733 2143067 337258 1805809
Total 53963244 6491482 4664264 1827218
From the above, it is clear that the figures furnished by them
vide their written submission dated 28.03.2011 do not match with the
figures shown in their ST-3 returns filed for the period 2004-05 to 2007-08,
as they claimed to have received total amount inclusive of Service Tax for
the said period and as per their own submission, after deducting Service Tax
of Rs.41,92,642/-the value should be Rs.3,52,69,527/- whereas, they had
shown the value of the service and Service Tax payable thereon as
Rs.3,66,24,511/- and Rs.43,48,415/- respectively in their said returns,
hence there is no correlation in the said figures.
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 20 of 31
27/- It is observed that as can be seen from the data provided in tables
given hereinabove, the details submitted by the Noticee during the course of
adjudication proceeding do not match with the details furnished by the
Company during the investigations. In this regard, I find that during the
investigation, while submitting details for computation of their Service Tax
liability, Shri Diwan Rahul Nanda being the Global Chairman and Managing
Director of the Company in his statement supra clearly stated that for the
purpose of further details he authorized Shri Amar Panghal, Chief Financial
Officer and Shri Mukesh Jain, Corporate Manager (Taxation), both of the
Company and the information provided by them would be binding on the
Company. Subsequently, the Company vide its aforesaid letter dated
12.06.2009 duly signed by Shri Amar Panghal, by stating that the service
tax calculation sheets provided by them during recording of the statement of
Shri Diwan Rahul Nanda had some error, again submitted certified statement
from 2004-05 to 2007-08 as per their audited balance sheets. It is therefore
observed that the details produced by them during investigations were
incomplete and incorrect and even the information produced by their
Managing Director during recording of his statement on 17.04.2009
mentioned above, was subsequently corrected vide their said letter dated
12.06.2009 and therefore, the details along with the Service Tax calculation
sheets produced by them together with their audited balance sheets vide
their said letter dated 12.06.2009 is final and therefore, I take that as the
base for working out their Service Tax liability.
28/- As per the worksheets submitted by the Company vide their letter
dated 12.06.2009 showing the details of branch-wise income, Service Tax
payable and Service Tax paid etc., and as per scrutiny of ST-3 returns filed by
the Noticee for the period 2008-09 and as verified by the jurisdictional
officer, as have been provided in Table-II, III & V supra, the correct details
of taxable service and service tax liability of the Noticee are found as under:
Table-VI
(Amount in Rs.)
Year Net Collection during the year
Value of service as per ST-3 returns
Differential value of service (Col.2-Col.3)
Service Tax payable for the year
Actual amount of Service Tax paid during the year
Differential amount of Service Tax to be paid (Col.5-Col.6)
1 2 3 4 5 6 7
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 21 of 31
2004-05 2262386 1856921 405465 280455 (including of Rs.49692 which was payable at the beginning of the year)
188652 91803
2005-06 4755011 4138688 616323 485011 384410 100601
2006-07 16308251 15559660 748591 1996130 1894494 101636
2007-08 22277904 15069242 7208662 2753549 1859450 894099
2008-09 17338733 17338733 0 2143067 337258 1805809
Total 62942285 53963244 8979041 7658212 4664264 2993948
Rate of Service Tax 2004-05 (upto 10.09.2004) : 8% 10.09.2004 to 17.04.2006 : 10% + 2% E.C. 18.04.2006 to 10.05.2007 : 12% + 2% E.C. 11.05.2007 to 23.02.2009 : 12% + 2% E.C. + 1% S & H.E. Cess
In view of above table, during the relevant period the Noticee have
received total Rs.6,29,42,285/- for providing the services under the taxable
category of ‘Security Agency Service’ and they should have deposited Service
Tax Rs.76,58,212/-, out of which Service Tax of Rs.2,66,383/- paid by them
during 2008-09 has already been deducted and thus, demand comes to
Rs.73,91,829/-, but they claimed to have deposited Service Tax Rs.47,02,000/,
whereas they were found to have paid Service Tax Rs.46,64,264/- which was
inclusive of Service Tax Rs.2,66,383/- i.e. already considered while issuing
show cause notice, hence payment made against demand of Rs.73,91,829/-
comes to Rs.43,97,881/-. Thus, there is still short payment of Service Tax of
Rs.29,93,948/- even though the Service Tax was being charged & collected by
the Noticee.
29/- Further, as regard allegation for short payment of interest of
Rs.4,053/- on delayed payment of Service Tax Rs.2,66,383/- against their total
liability of Rs.11,46,301/- for the period October, 2008 to March, 2009, the
Noticee have not submitted anything in their defence. In this context, I find
that the Noticee have made the said payment of Service Tax in three
installments after due date without interest as described in the notice and thus,
they have delayed in the said payment and therefore, the said amount of
interest is rightly recoverable from them under Section 75 of the Act.
30/- As regard their contention that the total amount received by
them for providing the service was inclusive of Service Tax, I find that on
being specifically asked regarding the collection of the Service Tax, Shri
Diwan Rahul Nanda, in his statement clearly described the formulae to work
out the quantum of Service Tax to be deposited by them and accordingly,
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 22 of 31
vide their letter dated 12.06.2009, they have submitted final worksheets
showing branch wise details of income, service Tax payable and Service Tax
paid as discussed hereinabove, and the same has been relied upon for
demand under the present notice. On perusal of the said worksheets, it can
be seen that Service Tax has been calculated on net collection which was not
show as inclusive of Service Tax. Further, the Noticee have not produced the
relevant documents i.e. ledger account, invoices, etc., and in absence of the
supporting documents, their claim for value of the service to be inclusive of
Service Tax is not acceptable. Further, in respect of the period 2008-09, it is
observed that the figures claimed for value of the services and service tax
payable by the Noticee are tallied with the figures shown in their ST-3
returns filed for the said period, as can be seen from Table-IV & V supra,
and hence, consideration charged & received by them is not inclusive of
Service Tax. Therefore, it is not the position that the Service Tax has been
demanded on the amount which is inclusive of Service Tax.
31/- Further, it is observed that as per the provisions of Section 67 of
the Finance Act, 1994, the gross amount charged by the service provider
from the service recipient for rendering service is the taxable value. Further,
as provided under Section 68 of the Act readwith Rule 6 of the Rules, every
person providing taxable service to any person shall pay Service Tax at the
specified rate to the credit of the Central Government, by the 5th of the
month, following the month in which the payments are received, towards the
value of taxable services provided to service recipient. Further, in view of
the provisions of Section 70 of the Act readwith Rule 7 of the Rules, every
person liable to pay the Service Tax shall himself assess the tax due on the
services provided by him and shall furnish to the Superintendent of Central
Excise, a half-yearly return in Form ST-3 along with a copy of the Form TR-
6, in triplicate for the months covered in the half-yearly return, by the 25th
of the month following the particular half-year.
32/- It is clear from the Table-V supra that, the Noticee had not
filed ST-3 returns due for the period October, 2005 to March, 2009 before
initiating the enquiry in the present matter. However, subsequently on
being asked by the jurisdictional Range Officer the said returns were filed
on 21.07.2009 & 31.08.2009, that too with incomplete & incorrect details
of the service provided by them and their Service Tax liability, as is
evident from the Table-V & VI above. It is also an admitted fact that
though the Noticee had charged & collected Service Tax from their clients
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 23 of 31
even then they have short paid Service Tax and whatever amount of
Service Tax has been paid by them was delayed. Further, as stated by Shri
Deewan Rahul Nanda, I find they were fully aware of the law and
procedure and further, there is no ambiguity in law regarding taxability of
the service and procedure for payment of Service Tax and filing of ST-3
return as relevant provisions are clearly provided in the Act/Rules. It
clearly shows that they have not declared actual value of the services
provided by them as well as Service Tax liability thereon, and thus, they
have willfully mis-stated the said facts in their ST-3 returns by way of
suppressing of actual value of taxable services alongwith Service Tax
payable thereon, and by contravening the aforesaid provisions of the
Act/Rules, with sole intention to evade the payment of the Service Tax.
33/- As regard the Noticee’s argument on time bar, I find that in
terms of the provisions of the Act and the Rules, every person providing
taxable service & liable to pay Service Tax is required to get himself
registered under Section 69 of the Act reawith Rule 4 of the Rules, and to
pay Service Tax as per the provisions of Section 68 of the Act readwith Rule
6 of the Rules and file returns under Section 70 of the Act reawith Rule 7 of
the Rules. The Service Tax law provides self assessment and it was
responsibility of the Notice to disclose all material facts to the department at
the relevant time. As discussed in foregoing paragraphs, the Noticee had
not filed ST-3 returns due for the period October, 2005 to March, 2009
before initiating the enquiry in the present matter, however, subsequently
on being asked by the jurisdictional Range Officer the said returns were
filed that too with incomplete & incorrect details of the service provided by
them and their Service Tax liability. Though the Noticee were fully aware
of the law and procedure and they had charged & collected Service Tax
from their clients but they have short paid Service Tax and whatever
amount of Service Tax has been paid by them was delayed. They have not
declared actual value of the services provided by them as well as Service
Tax liability thereon, and thus, they have willfully mis-stated the said facts
in their ST-3 returns by way of suppressing of actual value of taxable
services alongwith Service Tax payable thereon, with sole intention to
evade the payment of the Service Tax. I find that there was ample
opportunity for them to bring these facts to the notice of the department at
the time of obtaining registration, furnishing information/details under Rule
4 readwith Rule 5 of the Rules, filing returns, but it is seen that these facts
were not properly reported/reflected in ST-3 returns filed and the Noticee on
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
Page 24 of 31
his own have not brought the relevant material facts to the notice of the
department at any point of time before the present investigation. Therefore,
I find that they had to themselves assess their liability in terms of the
provisions of the Act and Rules, but, they had acted in the manner discussed
in foregoing paras, the facts of which were revealed during the present
investigation only. Further, as mentioned hereinabove, the Noticee have
admitted that though they have collected Service Tax from their clients but
they have delayed in paying Service Tax due to financial crises and they
were ready to pay balance amount of the Service Tax, however the same
has not been paid so far. Therefore, I find that they have knowingly
suppressed the facts involved in the present case and also willfully mis-
stated the facts and tried to mislead the department by way of not
reporting/reflecting actual facts in ST-3 returns just to escape from the
payment of Service Tax with intent to evade the Service Tax, even after the
same was collected. Thus they have evaded the Service Tax on the
consideration charged/received for the services as mentioned herein above.
Therefore, in view of above finings, I hold that the Noticee has
violated/contravened provisions of Section 67, 68 and 70 of the Act
inasmuch as they failed to consider correct taxable value and escaped from
the assessment of tax, to credit appropriate Service Tax to the Government,
and to furnish correct returns in respect the said services, for reasons stated
above and thus, they deliberately mis-stated and withheld the full facts of
their said activities/services with an intent to evade the payment of Service
Tax due thereon. Therefore, I find that the said contention of the Notice is
not tenable and thus, extended period of limitation is invokable in the
present case.
34/- As regard their contention of bonafide belief, I find that in view
of my findings that the Noticee had intentionally/knowingly suppressed/mis-
stated the facts, they cannot escape from their liability on the ground of one
or other reasons put forth without supportive evidences. I further observe
that, though there was no ambiguity in the relevant provisions of the
Act/Rules, the Noticee had acted in conscious disregard of its obligation and
also acted deliberately in defiance of the Act/Rules with sole intent to evade
the payment of Service Tax due, which clearly shows mens rea in this case
and thus, I do not find any bonafide belief by them in the instant case.
35/- Therefore, I find that this is a fit case for invoking extended
period of limitation for demand under proviso to Section 73(1) of the Act. In
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view of the above, the Noticee is rightly required to pay an amount of the
Service Tax to the tune of Rs.73,91,829/- as demanded in the notice. I
further find that out of the said demand, an amount of Rs.43,97,881/- has
already been paid by the Noticee which is required to be appropriated
against the demand and balance amount of the demand is still liable to be
recovered from the Notice.
36/- As regard their contentions for not levying interest Section 75 of
the Act and non imposing penalty Section 76 and 78 of the Act, I have
already held that the demand under the notice is recoverable by invoking
extended period of time under Section 73 of the Act and Section 75 of the
Act mandates levy of interest on delayed payment of Service Tax, therefore,
the demand is recoverable alongwith interest under the said Section.
Further, I find that during the relevant period, Section 78 of the Act provides
as follows:
“78. Penalty for suppressing value of taxable service.- Where any Service Tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of – (a) fraud; or (b) collusion; or (c) willful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules
made thereunder with intent to evade payment of Service Tax, the person, liable to pay Service Tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such Service Tax and interest thereon, if any, payable by him, which shall not be less than, but which shall not exceed twice, the amount of Service Tax so not levied or paid or short-levied or short-paid or erroneously refunded;
Provided that where….. Provided further that….. Provided also that ….. Provided also that ….. Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply
Explanation - For the removal of doubts, it is hereby declared that- (1) the provisions of this section shall also apply to cases in
which the order determining the Service Tax under sub-section (2) of Section 73 relates to notices issued prior to the day on which the Finance Act, 2003 receives the consent of the President.
(2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.”
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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It is observed that where any Service Tax has not been levied or
paid or has been short-levied or short-paid by the reason of suppression of
facts or fraud or collusion or willful mis-statement or contravention of any of
the Act or the Rules made thereunder with intent to evade payment of
Service Tax, Section 78 of the Act provides for mandatory penalty and the
person, liable to pay such Service Tax, shall also be liable to pay a penalty,
in addition to such Service Tax and interest thereon. The amount of penalty
leviable under this section is not less than the amount equal to Service Tax
and not more than twice the amount of Service Tax to be paid under Section
73 of the Act. However, a proviso to section 78 provides an opportunity to
the assessee to get the amount of penalty reduced to 25% of the amount of
Service Tax if he pays the amount of Service Tax determined under Section
73 plus interest thereon under Section 75 plus the reduced amount of
penalty within 30 days of communication of order under Section 73. It is
settled law that penalty is imposable on the basis of law operating on the
date on which the wrongful act is committed, and it is levied on the totality
of facts and circumstances of each case under the relevant provisions. In
view of the findings given in foregoing paras, as extended period of time for
demand under proviso to Section 73 of the Act is invokable in the present
case, I find that the Noticee has rendered themselves liable for penalty
under Section 78 of the Act for the various acts/commission committed by
them, as discussed in foregoing paras.
Further, as the Notice are found to have delayed the payment of
Service Tax which continued during the period covered under the notice,
they appear liable to be penalized under Section 76 of the Act also. The said
section provides penalty for failure to pay Service Tax in contravention of the
Act/Rules and it makes no mention of state of mind (it does not describe any
state of mind). As per provisions of the said section, the liability is absolute,
i.e. penalty is leviable for violation of Act/Rules irrespective of intention. This
penalty is over and above the amount of Service Tax due and interest
payable thereon. During the period covered by the impugned notice, the
penalty payable under section 76 of the Act was as follows:-
Sl. Period Provisions under section 76 of Finance Act, 1944 1. Upto
17.04.2006 Any person, liable to pay Service Tax in accordance with the provisions of section 68 or rules made thereunder, who fails to credit the tax shall pay in addition to paying such tax, and interest on that tax in accordance with the provisions of section 75, a penalty which shall not be less
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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than one hundred rupees for everyday during which such failure continues but which may extend to two hundred rupees for every day during which such failure continues, so, however, that the penalty under this clause shall not exceed the amount of Service Tax that he failed to pay.
2.
With effect from 18.04.2006 (Change by Finance Act, 2006).
Any person, liable to pay Service Tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and interest on that tax in accordance with the provisions of section 75, a penalty which shall not be less than two hundred rupees for everyday during which such failure continues or at the rate of two percent of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of Service Tax. Provided that the total amount of penalty payable in terms of this section shall not exceed the Service Tax payable.
As indicated hereinbefore, the rate at which penalty under
Section 76 is payable has varied from time to time during the period covered
by the impugned show cause notice. Therefore, quantification of penalty
payable by the Noticee under the said section will have to be done by
applying the rate of penalty as applicable up to 17.04.2006 for the period up
to 17.04.2006, and rate as applicable w.e.f. 18.4.2006 for the period
18.04.2006 onwards, as ordered in the latter part of this order.
Further, I find it relevant to refer to fifth proviso to Section 78 of
the Act, inserted by the Finance Act, 2008 w.e.f.10.05.2008, which provides
that if the penalty is payable under this section, the provisions of Section 76
shall not apply. Therefore, if penalty under Section 78 is imposed, penalty
under Section 76 is not imposable after said amendment. However, Section
76 does not contain such provision. Hence, it is not that these provisions are
mutually exclusive. Further, the period involved in the present case pertains
to prior and after to such amendment, as the impugned show cause notice
covers the period from 2005-06 to 2008-09. It means penalty under both
sections is applicable for the period prior to the said amendment. Therefore,
Section 76 as well as Section 78 would apply for the period upto 09.05.2008
and w.e.f. 10.05.2008, the provisions of Section 76 ibid, would not apply if
penalty is held payable under Section 78. I, therefore, find that since the
Noticee are held to be penalized under Section 78 even after the said
amendment, the penalty under Section 76 is not imposable upon the Noticee
for the period w.e.f.10.05.2008 onwards, and penalty under Section 78
alone shall be payable by the Noticee. Hence, the Noticee’s contentions are
not acceptable.
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37/- Further, as regard the contention of the Noticee for non-
imposition of penalty in view of the provisions of Section 80 of the Act, it is
observed that said section provides that notwithstanding anything contained
in the provisions of Section 76 and 78, no penalty shall be imposable on the
assessee for any failure referred to in the said provisions, if the assessee
proves that there was reasonable cause for the said failure. In this context, I
already recorded findings that the Noticee has knowingly suppressed the
facts involved in the present case and also willfully mis-stated the facts and
tried to mislead the department by way of not reporting/reflecting these
facts in ST-3 Returns just to escape the payment of Service Tax, with sole
intention to evade the Service Tax. They had continued with the same
manner during the relevant period. Hence, these acts of the Noticee can not
be considered as reasonable cause for any failure and thus, their contention
is untenable.
38/- As regard proposal for penalty upon Shri Diwan Rahul Nanda,
Chairman and Managing Director of the Company under Section 77 of the
Act, I find that during personal hearing held on 16.05.2012 Shri S. M.
Dodiya, C.A. on behalf of Shri Diwan Rahul Nanda has reiterated the
contents of the Noticee’s written submission dated 27.10.2009, wherein by
producing resolutions dated 20.10.2008 & 21.04.2009 duly signed by S/Shri
Diwan Rahul Nanda and Amar Panghal respectively the Noticee have argued
that Shri Diwan Rahul Nanda was not the compliance officer of them under
the Act and hence, he was not liable for penalty under said Section. It is
observed that Section 77 of the Act provides a residual penalty, which is for
breach of any rule, if no penalty has been prescribed. However, w.e.f.
10.05.2008, the Finance Act, 2008 has amended said section, prescribing
various quantum of penalty for specified offences. Prior to the amendments,
this section provided general penalty for contravention of any provision for
which no penalty was provided such as failure to take registration, to
keep/maintain books of accounts, etc.. In the present case also the Noticee
had failed to comply with provisions of the Act/Rules relating to levy &
deposit of Service Tax, assessment of taxable service & tax liability, filing of
returns, issue of invoice, etc.. In this context, it is observed that on being
summoned during the course of investigation in the instant case, Shri
Diwan Rahula Nanda appeared in the capacity of Global Chairman and
Managing Director of the Company before the investigating officer and
deposed in his statement dated 17.04.2009 referred to above. Vide his said
statement, he has authorized to their officials namely Shri Amar Panghal,
V.ST/15-218/Adj/09 Order-in-Original No.33/COMMR/2012 M/s. Tops Security Limited, Rajkot
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Chief Financial Officer and Shri Mukesh Jain, Corporate Manager (Taxation)
for furnishing further details in the matter by stating that the information
provided by them would be binding on the company. I find that his status in
the company and authorization of said officials have not been disputed by
the Noticee at any time and further, resolutions are not pertaining to period
covered in his said statement. In view of above, I find that he was fully
aware of the law and procedure related to Service Tax and he was very well
aware that the Noticee were providing taxable service and were collecting
Service Tax from their clients but were not depositing the same to the Govt.
Account and he being the persons in charge of the Company when the said
offence of evasion of Service Tax was committed by the Noticee, was
responsible for the conduct of the business of the Company including
Noticee. Therefore, I find that he is liable to penal action under said section
for not taking appropriate action to deposit the Service Tax even though the
same was being collected by them from their clients, not filing Service Tax
returns and not paying Service Tax by way of fraud, willful mis-statement,
suppression of facts and contravention of provisions of the Act/Rules with an
intent to evade payment of Service Tax.
39/- In view of above discussion and findings, I pass the following order:
Order
(i) I confirm the demand of Service Tax of Rs.73,91,829/-
(Rupees Seventy Three Lakhs Ninety One Thousand Eight
Hundred Twenty Nine only) including Education Cess and
Secondary and Higher Education Cess, against M/s. Tops
Security Limited, B-202, Pooja Complex, Near GPO Harihar
Chowk, Rajkot-360001 under proviso to Section 73(1) of the
Finance Act, 1994 readwith Section 73A ibid and order for
recovery thereof from them. As, M/s. Tops Security Limited,
Rajkot has already paid an amount of Rs.43,97,881/-
(Rupees Forty Three Lakhs Ninety Seven Thousand Eight
Hundred Eighty One only) towards their said liability,
therefore, the same is appropriated and the balance amount
of Rs.29,93,948/- (Rupees Twenty Nine Lakh Ninety Three
Thousand Nine Hundred Forty Eight only) is ordered to be
recovered from them.
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(ii) I order for levy of interest under Section 75 of the Finance
Act, 1994 on the amount of Service Tax, as confirmed at Sr.
No.(i) above against M/s. Tops Security Limited, Rajkot.
(iii) I also order for levy of interest of Rs.4,053/- (Four Thousand
Fifty Three only) under Section 75 of the Finance Act, 1994
on delayed payment of Service Tax of Rs.2,66,383/-from
M/s. Tops Security Limited, Rajkot.
(iv) I impose penalty of Rs.73,91,829/- (Rupees Seventy Three
Lakhs Ninety One Thousand Eight Hundred Twenty Nine
only) on M/s. Tops Security Limited, Rajkot, under Section
78 of the Finance Act, 1994. However, as provided in proviso
to Section 78 ibid, if M/s. Tops Security Limited, Rajkot pays
the amount of Service Tax confirmed along with interest
thereon, within thirty days from the communication of this
order, the amount of penalty shall be twenty-five per cent of
the penalty imposed above. The benefit of reduced penalty
shall be available only if the amount of penalty so
determined has also been paid within thirty days from the
receipt of this order.
(v) I impose penalty on M/s. Tops Security Limited, Rajkot,
under Section 76 of the Finance Act, 1994 and accordingly
order that they shall pay in addition to Service Tax payable
upto 09.05.2008, out of the amount of Service Tax
confirmed at Sl. No.(i) above, and the interest on that tax
amount in accordance with the provisions of Section 75 ibid,
as ordered at Sl. No.(ii) above, penalty –
(a) For the Service Tax due and confirmed for the period upto
17.04.2006, at the rate of Rs. 100/- for every day during
which failure to pay such tax continues, provided that the
total amount of penalty shall not exceed the Service Tax
due and confirmed for the period upto 17.04.2006,
(b) For the Service Tax due and confirmed for the period from
18.04.2006 to 09.05.2008, at the rate of 2% of such
Service Tax, per month, starting with the first day after
the due date till the date of actual payment of the said
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outstanding amount of Service Tax due and confirmed for
the period from 18.04.2006 to 09.05.2008, provided that
the total amount of the penalty payable shall not exceed
the Service Tax due and confirmed for the period from
18.4.2006 to 09.05.2008, and
(c) For the Service Tax due and confirmed for the period from
10.05.2008 onwards, no penalty is imposed under Section
76 of the Finance Act, 1994, as amended, in view of
proviso V to Section 78 of the Finance Act, 1994, as
amended.
(vi) I impose penalty of Rs.5,000/- on Shri Diwan Rahul Nanda,
Chairman and Managing Director of M/s. Tops Security
Limited, under Section 77 of the Finance Act, 1994.
Show Cause Notice No.V.ST/AR-I/RJT/RJT/COMMR/217/09 dated
23.10.2009 issued by Commissioner, Central Excise, Rajkot, is decided in
above terms.
(B. K. Bansal) COMMISSIONER
F. No.: V.ST/15-218/Adj/09 Central Excise & Customs, Date: 17.05.2012 Rajkot By RPAD/Hand Delivery To,
1. M/s. Tops Security Limited, B-202, Pooja Complex, Near GPO, Harihar Chowk, Rajkot-360001
(New Address: A-40, Aalap Avenue, Opp Radhe Hall, Nr. SNK School, University Road, Rajkot-360 005)
2. Shri Diwan Rahul Nanda, Managing Director, M/s Tops Security Limited, 5, Royal Palms Golf & Country Club, Aarey Milk Colony, Goregaon (E), Mumbai - 400 065.
Copy to: 1. The Chief Commissioner, Central Excise, Ahmedabad Zone,
Ahmedabad. 2. The Additional Director General, Directorate General of Central
Excise Intelligence, Ahmedabad Zonal Unit, Ahmedabad 3. The Deputy Commissioner (Legal/RRA/Recovery), HQ., C. Ex., Rajkot. 4. The Deputy Commissioner, Service Tax Division, Rajkot. 5. The Superintendent, Service Tax Range-I, Rajkot. 6. Guard File.
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