No Service Tax is Applicable on Free Supply Material to CISF: CESTAT [Read Order]

The Bangalore bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that service tax does not apply to free supply material to CISF. It was observed that no value is attributable to the infrastructure/arms/ammunitions made available to CISF.

NMDC Ltd., the appellants, are receiving security services from the Central Industrial Security Force(CISF) and discharging service tax of a Reverse Charge Mechanism basis. The appellants also provided amenities like free accommodation, barrack accommodation, telephone charges, diesel for vehicle, etc., which were not included in the gross taxable value, hence, show-cause notice was issued to them for recovery of the service tax by including the said free supply material to CISF. On adjudication, the demands were confirmed and penalties were imposed. The Commissioner (A) upheld the order of the original authority.

Simplify Tax Settlements with Vivad se Vishwas Insights - Click here to Register

The appellant argued that the Delhi Principal Bench had ruled in their favor in their own case by issuing Final Order No. 56223/2024 on August 2, 2024. When determining whether to include free lodging, barrack lodging, telephone charges, vehicle diesel, and other expenses incurred by the appellant in the gross taxable value, the Tribunal noted that the department was not supported by the claims that the appellant concealed the extent of taxable services in the form of ST-3 returns because the appellants had sufficiently demonstrated that they disclosed all of the information they believed to be true.

They believe that the CISF's provided weapons, ammo, and infrastructure are worthless. Therefore, it was impossible for the appellant to disclose anything different than what they had already disclosed. It is decided that the prolonged term based on these accusations was incorrectly invoked. When facts were known to both parties, it was believed that suppressing facts could only mean that the right information was not purposefully withheld in order to avoid paying a duty. Therefore, we maintain that the extended period has been incorrectly triggered.

Simplify Tax Settlements with Vivad se Vishwas Insights - Click here to Register

The two member bench of Dr. D.M. Misra, Member (Judicial) and  R. Bhagya Devi, Member (Technical)  set aside the impugned order relying on the earlier orders of Tribunal.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates