Full Judgment
After 'Security Agency' was introduced in the Finance Act, 1994 for the purpose of levy of service tax (16.10.1998), M/s. SSB were required to take fresh registration in this category and accordingly they obtained registration as a Security Agency on 22.11.1999. But they continued to pay service tax in the category of 'Man Power Recruiting Agency' from 16.10.1998 to 30.09.1999. As they felt that they were not liable to pay service tax in this category from 16.10.1998 to 30.09.1999, they claimed refund of the tax. The original authority rejected this claim and appropriated the tax paid by the party for the said period in the category of 'Man Power Recruiting Agency' towards the tax which ought to have been paid in the category of 'Security Agency'. The claim for refund of tax paid for the period prior to 16.10.1998 was rejected as time-barred. M/s. SSB filed an appeal with the Commissioner (Appeals).
The appellate authority held, in respect of the refund claim for the period prior to 16.10.1998, that the claim was not time-barred as the tax had been paid under protest. It directed the lower authority to refund the tax subject to verification for unjust enrichment. As regards the refund claim for the remaining period, apparently, the decision of the original authority was upheld. Appeal No. S/15/2001 is against the rejection of refund claim for the period 16.10.1998 to 30.09.1999. This appeal is on the following grounds: 1. The power to adjust the tax paid on Man Power Recruitment Agency to Security Agency is outside the scope of Section 11B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994.
2. After hearing both sides and considering their submissions, we find that the service tax for the period 16.10.1998 to 30.09.1999 was paid in the category of 'Man Power Recruitment Agency' whereas the same was payable in the category of 'Security Agency'. Admittedly, the tax amount of Rs. 10,995/- was due to the Central Government from the assessee as 'Security Agency'. The said amount of tax had been wrongly collected in the category of 'Man Power Recruitment Agency' and hence liable to be refunded. In the circumstances, the provisions of Section 11 of the Central Excise Act, as applicable to service tax matters, were invocable. The learned Counsel for the appellants has also fairly conceded the applicability of Section 11 of the Central Excise Act.
Under this provision, as applied to the facts of this case, it was open to the original authority to deduct any amount of service tax payable by the assessee as 'Security Agency' from any amount of service tax refundable to him by reason of this amount having been wrongly collected in the category of 'Man Power Recruitment Agency'. This is precisely what was done by the original authority in the present case.
Hence the appropriation of Rs. 10,995/- (claimed as refund) as the service tax towards 'Security Agency' is in accordance with law and the same cannot be challenged on the aforesaid grounds. In the result, Appeal No. S/15/2001 gets dismissed.
3. The remaining appeal is against demand of service tax of Rs. 1,08,781/- for the period 16.10.1998 to 31.05.2000. The demand has been challenged on merits as well as on limitation. A show-cause notice dated 23.11.2000 was issued for recovery of the above tax under Clause (a) of Section 73 of the Finance Act, 1994 with interest under Section 75 of the Act. It also proposed penalties on the party under Sections 76 and 78. The show-cause notice alleged that expenses like wage, ESI/EPF subscriptions etc., were also part of the value of the taxable service for payment of service tax and that, by deducting these elements from the taxable value and suppressing this fact before the department, M/s. SSB was liable to pay differential tax to the Central Government within the extended period of limitation. The party, in their reply, claimed that the above reimbursable expenses were not includible in the value of taxable service. They relied on CBEC's Circular No. 341/43/96-TRU dated 31.10.1996 which, in relation to advertising agency, clarified that reimbursable expenses were not includible in the value of taxable service. The original authority rejected the assessee's contentions and confirmed the demand of service tax against them for the period 16.10.1998 to 31.05.2000 and imposed on them penalties of Rs. 100 per day and Rs. 1,08,781/- under Sections 76 and 78 respectively. The first appellate authority sustained the demand of service tax but set aside the penalties. The present appeal is against the demand of service tax.
4. Learned Counsel for the appellants submitted that they had filed periodical returns from the very beginning and that service tax was paid on the correct taxable value in accordance with Section 67(v) of the Finance Act, 1994. Their employees' wages and other reimbursable expenses were not includible in the taxable value as clarified by CBEC in respect of other taxable services. In this connection, learned Counsel referred to Circular No. 43/5/97-TRU dated 02.07.1997, wherein it was clarified that the service tax on 'Man Power Recruitment Agency' should be on the gross amount charged to the client for services rendered in relation to the recruitment of man power, excluding the expenses incurred by the Agency on behalf of the client, which were reimbursed on actual basis. Learned Counsel has also referred to a letter dated 18.08.1997 of the Superintendent of Central Excise issued to one M/s. Guruvayurappan Security Bureau, wherein the Superintendent had stated that the taxable value for payment of service tax by a 'Man Power Recruitment Agency' was the gross amount charged to the client excluding the amounts incurred towards expenses which were reimbursed on actual basis. Learned Counsel also raised the plea of limitation against the demand of tax. He submitted that the service tax return for the period Oct.'99 to Mar.2000 had been filed on 25.04.2000 and the return for the period Apr.-May, 2000 had been filed on 30.10.2000.
Taking into account the date of filing of the returns, learned Counsel submitted that the show-cause notice demanding differential tax was beyond the normal period of limitation insofar as a part of the demand period was concerned. Learned Counsel, in this connection, referred to the order passed by this Bench in the case of Guruvayurappan Security Bureau v. Commissioner of Central Excise, Madurai 2006 (1) S.T.R. 202 (Tri.-Chennai), wherein a similar case was remanded to the original authority. On the other hand, learned SDR relied on the Tribunal's decision in Punjab Ex-servicemen Corporation v. Commissioner of Central Excise, Chandigarh 2007 (5) S.T.R 214 (Tri.-Del.), wherein it was held that the gross amount charged by 'Security Agency' from their clients was to be taken as the taxable value for the purpose of levy of service tax.
5. We have given careful consideration to the submissions. The impugned demand is in the category of 'Security Agency'. It is on the sum of employees' wages and other reimbursable expenses which were incurred by the assessee in connection with the rendering of security services to clients but not included in the value of taxable service for payment of tax. The circulars of the Board cited by the appellants do not relate to security agency. The provisions of Section 67(v) as they stood during the material period did not provide for abatement of such reimbursable expenses from the taxable value. After examining all the relevant provisions, this Tribunal has held in the case of Punjab Ex-servicemen Corporation (supra) that 'Security Agency' was required to pay service tax on the gross amount charged by it from its client.
The decision is squarely applicable to the instant case. In the case of Guruvayurappan Security Bureau (supra), this Bench was only remanding the matter to the original authority to consider the party's prayer for deductions. On merits, the appellants do not have a case against the demand of service tax. The memorandum of appeal does not contain any plea of limitation. In the result, Appeal No. S/16/2001 also gets dismissed.