2011 (5) TMI 174 - AT - Service Tax

Waiver of pre-deposit - Application of stay - Manpower Recruitment Agency - The appellant is Security Guards Board constituted under section 6 of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act 1981 - The minimum wages and allowances payable to security guards by establishments (principal employers) to security guards were prescribed for the purpose - Neither in the show-cause notice nor in the impugned order nor in the submissions of the JCDR is anything to indicate that this appellant rendered Manpower Recruitment Agency service at any time during the period of dispute - Appellant is directed to deposit only 50 per cent of Rs. 9, 76, 97, 740 under section 35F of the Central Excise Act - In the absence of any plea nor any evidence of financial hardships the amount shall be deposited within six weeks from the date of receipt of a certified copy of this order -

Summary

Issues Involved:
1. Waiver of pre-deposit and stay of recovery of service tax.
2. Classification of the appellant's activities under "Security Agency" service and "Manpower Recruitment Agency" service.
3. Applicability of service tax to the appellant as a statutory body.
4. Financial hardship claim by the appellant.

Detailed Analysis:

1. Waiver of Pre-deposit and Stay of Recovery of Service Tax:
The appellant sought waiver of pre-deposit and stay of recovery for a service tax demand of Rs. 12,90,54,553 and associated penalties under sections 77 and 78 of the Finance Act, 1994. The demand pertained to the period from May 2006 to March 2007 under "Security Agency" service and "Manpower Recruitment Agency" service.

2. Classification of the Appellant's Activities:
The appellant, a Security Guards Board constituted under the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981, argued that it was not a "commercial concern" and thus not liable for service tax under "Security Agency" service. The Board's activities were claimed to be sovereign functions aimed at implementing welfare measures for security guards, not commercial services.

The respondent countered that the definition of "Security Agency" had been amended effective from May 1, 2006, replacing "commercial concern" with "person," thus broadening the scope to include statutory bodies like the appellant. The Tribunal agreed with this interpretation, noting that the Board's activities fit within the amended definition of "Security Agency" as they involved providing security personnel to registered establishments.

3. Applicability of Service Tax to the Appellant as a Statutory Body:
The appellant relied on previous decisions and a circular (Circular No. 89/7/2006-S.T.) clarifying that statutory functions performed by public authorities were not taxable services. However, the Tribunal distinguished these precedents, noting that the amendment to the definition of "Security Agency" removed the commercial element, making the appellant liable for service tax.

The Tribunal also considered CBEC instructions (F.No. 345/1/2007-TRU) regarding the Central Industrial Security Force (CISF), which, despite being a statutory body, was required to pay service tax for providing security services. The Tribunal found this analogous to the appellant's situation.

4. Financial Hardship Claim by the Appellant:
The appellant claimed financial hardship, arguing it had no funds for pre-deposit. However, the Tribunal found no substantial evidence to support this claim. Consequently, the Tribunal directed the appellant to pre-deposit 50% of the service tax amounting to Rs. 9,76,97,740, given the statutory nature of the appellant's functions.

Conclusion:
The Tribunal concluded that the appellant was liable to pay service tax under the amended definition of "Security Agency" service. It directed the appellant to pre-deposit 50% of the determined tax amount within six weeks, dismissing the claim of financial hardship due to lack of evidence. The Tribunal also noted ambiguity in the demand related to "Manpower Recruitment Agency" service but did not find sufficient grounds to exclude the entire demand.