2018 (5) TMI 1823 - AT - Service Tax

Levy of tax on state police - security agency service - certain charges collected for providing police guard for currency chest of various bank branches, financial institutions and also other Central and State organizations and public enterprises - Held that - An identical issue has come-up for consideration before this Tribunal in the case of THE DEPUTY COMMISSIONER OF POLICE JODHPUR, SUPERINTENDENT OF POLICE VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAIPUR 2016 (12) TMI 289 - CESTAT NEW DELHI , where it was held that the police department, which is an agency of the State Govt., cannot be considered to be a person engaged in the business of running security services. Consequently, the activity undertaken by the police is not covered by the definition of Security Agency under Section 64 (94)of the Act. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether charges collected by the police department for providing security services are subject to service tax.

Analysis:
The case involved an appeal against the demand for Service Tax on charges collected by the police department for providing security services. The appellant, an agency of the M.P. Government, was providing police guards for various entities. The issue was whether these charges constituted taxable security services under the Finance Act, 1994. The Tribunal referred to a previous order where it was established that the police department, as an agency of the State Govt., cannot be considered a person engaged in the business of running security services. The Tribunal also noted that the fees collected were in the nature of a prescribed fee for performing statutory functions, deposited into the Government Treasury. Based on this precedent and the CBEC Circular, the Tribunal concluded that no service tax could be levied on such activities by the police department.

The learned AR for Revenue conceded that the issue had been settled in favor of the appellant/assessee in a previous final order. The Tribunal reiterated the findings from the earlier case, emphasizing that the police department's activities did not fall under the definition of a Security Agency as per the Act. The Tribunal highlighted that the fees collected were for performing statutory functions and were deposited into the Government Treasury, aligning with the CBEC Circular. Consequently, the impugned order demanding Service Tax was set aside, and the appeal by the appellant/assessee was allowed with any consequential relief.

In summary, the Tribunal ruled in favor of the appellant/assessee, holding that the charges collected by the police department for providing security services were not subject to service tax. The decision was based on the nature of the police department's functions, its status as an agency of the State Govt., and the guidelines provided in the CBEC Circular. The Tribunal's judgment was consistent with the earlier precedent and established that no service tax could be imposed on such activities carried out by the police department.