Free Accommodation and Reimbursements to CISF Personnel Not Taxable as Consideration for Security Services: CESTAT [Read Order]
CESTAT set aside a Rs. 1.77 crore service tax demand, ruling that free accommodation and reimbursements provided by RINL to CISF personnel are not taxable consideration for security services.
The Hyderabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that free accommodation and other reimbursements provided by Rashtriya Ispat Nigam Ltd. (RINL) to CISF personnel cannot be treated as taxable consideration for security services.
The Commandant, CISF, had appealed against an order confirming a service tax demand of Rs. 1.77 crore along with interest and penalty for the period October 2011 to June 2012. The department argued that the housing facilities and other reimbursements extended by RINL to CISF personnel amounted to additional non-monetary consideration under Section 67(1)(ii) of the Finance Act, 1994, and were liable to service tax.
The appellant’s counsel argued that such expenses were provided free of cost by RINL and had no nexus with the services rendered. It was explained that the cost of free accommodation and other facilities could not be treated as part of the assessable value.
The counsel relied on Supreme Court judgments which held that free supplies and reimbursements cannot be included in the taxable value. They also pointed out that in an earlier order covering the period from April 2009 to September 2011, the Hyderabad Bench of the CESTAT had already decided the same issue in favour of CISF.
The revenue counsel relied on the findings of the adjudicating authority and argued that the facilities extended by RINL should be treated as additional consideration.
The two-member bench comprising A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member) observed that the demand arose from a periodical show cause notice following an earlier one, which had already been decided in favour of CISF in May 2024. The tribunal observed that the matter was no longer open to dispute, as the issue had already been settled.
The tribunal explained that since the earlier demand had been set aside, the subsequent demand could also not survive on similar grounds. The impugned order was quashed, and the penalty was also set aside. The appeal was allowed in favour of CISF.
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