Co-operative Society eligible for Abatement/exemption of 75% of Service Tax liability: CESTAT [Read Order]

M/s Kailashpati Ex Servicemen Welfare Society Limited, the appellant challenged the Order-in-Appeal No wherein the Commissioner (Appeals) confirmed the demand of Rs. 19,35,929/- along with interest and appropriate penalty. The appellant was registered with the department under the category of “Security Agency services” and availing the benefit of notification 30/2012-ST dated 20.6.2012. During the period 2012 to 2015, the appellant had provided security services to various organizations and collected charges for the security services provided by them.

An audit was conducted, and thereafter, a show cause notice dated 5.2.2016 was issued to the appellant alleging that the appellant has paid service tax on 25% of the taxable value by wrongly availing the benefit of the notification No.30/2012-ST dated 20.6.2012. The show cause notice also invoked the extended period of limitation, alleging that the appellant had suppressed the facts by way of availment of undue benefit, with an intent to evade payment of service tax.

Accordingly, the show cause notice proposed a demand of Service Tax amounting to Rs. 19,35,929 /- for the period from 01.12.2012 to 31.03.2015, along with interest and penalty under section 78 of the Finance Act 1994. The adjudicating authority, vide order in original no. 69/2016-17(ST) dated 28.02.2017 confirmed the demand of service tax of Rs. 19,35,929/-(inclusive of Cesses) for the period from 01.12.2012 to 31.03.2015, along with interest and also imposed penalty of Rs. 19,35,929/- under section 78 of the Finance Act 1994. The Commissioner (Appeals), dismissed the appeal of the appellant vide Order in Appeal No. 93(RK)ST/JPR/2017-18 dated 23.3.2018.

Commissioner (Appeals) Failed to Address Allegations and Defence: CESTAT Orders Re-examination in Import Misdeclaration [Read Order]

Counsel for the appellant submitted that the appellant was a co-operative society and hence fell under the category of "association of persons" in view of the definition of persons given in section 65B(37) of the Finance Act and in view of the Notification no.

30/2012 dated 20.6.2012 wherein it was provided that when an “association of persons” provide security services to a body corporate, then 25% tax is to be paid by the service provider and 75% by the service receiver.

Counsel contended that it is an undisputed fact that the service receiver had paid the tax on 75% of the value of the taxable service and demanding the same now again from the appellant is not legally justified as held in various cases by the Tribunal. He further submitted that the Tribunal in the case of Sahara Ex-Servicemen Welfare Co-Operative Society Limited vs. Commissioner of CGST, Customs and Central Excise Alwar had taken a similar view.

The authorised representative for the Department at the outset reiterated the discussion and findings made in the impugned order. However, in all fairness, Authorised Representative conceded that the issue was covered squarely by the Tribunal’s decision. The appellant is admittedly a co-operative society registered under the Rajasthan Co-operative Society Act, 2001. The copy of the certificate of registration is also produced by the appellant. There is no evidence to the contrary by the department.

A two-member bench of Dr. Rachna Gupta, Member (Judicial) and Hemambika R. Priya, Member (Technical) held that the appellant being a co-operative society was very much eligible for the abatement/exemption of 75% of the tax liability. The Order-in-Original has denied the said exemption holding the appellant is not the “Association of Person”.

It is an admitted fact that 25% of tax liability has been discharged by the appellant, and the confirmation of the remaining 75% of the gross value as service tax from the appellant is not sustainable.

Further viewed that it has already been held that the appellant was not liable to the tax as has been proposed by the impugned show cause notice and has been confirmed by the impugned order. Hence, the question of evasion of tax becomes redundant. The tribunal held that the extended period has wrongly been invoked. The bench set aside the impugned order and allowed the appeal.

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