2017 (2) TMI 1489 - AT - Service Tax

Levy of Service tax - security services or not - providing security services by Police Department to various firms/organizations for commercial consideration and collected verification charges - HELD THAT - An identical issue has come up before this Tribunal in the assessee-Appellant s own case 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 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. Demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal by Commissioner of Customs & Central Excise; Tax liability on security services; Constitutional validity of Sea Customs Act; Levy of service tax on State Police services.

Analysis:
The Appellants challenged Order-in-Appeal by the Commissioner of Customs & Central Excise, Jaipur-I regarding the tax liability on security services provided by the assessee for commercial consideration. The Department had imposed service tax on these services, leading to the appeals. The Department justified its orders citing the Constitutional Bench of the Supreme Court's observation on the exclusive power of Union Parliament to regulate trade and commerce, emphasizing the distinction between direct and indirect taxes. However, the Tribunal noted that the Constitutional validity of the Sea Customs Act, as examined by the Supreme Court, was not a relevant issue in the present case.

In a previous case involving the same Appellant, the Tribunal had ruled that the police department, as an agency of the State Government, did not fall under the definition of a "person" engaged in the business of security services. The fees collected by the police department were considered as fees for performing statutory functions and were deposited into the Government treasury, exempting them from service tax as per a CBEC Circular. The Tribunal also highlighted that previous case laws did not directly address the issue of levying service tax on State Police services.

Based on the precedent set in the previous case involving the same Appellant, where the Tribunal ruled in favor of the Appellant regarding the levy of service tax on State Police services, the impugned orders were set aside, and the appeals were allowed. Consequently, all appeals filed by the assessee-Appellants were allowed, overturning the Commissioner's orders.