2018 (4) TMI 418 - AT - Service Tax

Levy of tax on state police - Security Agency Services - providing security to banks, individuals, security for cricket matches, IPL, World Cup, Mumbai Port Trust, Mazagaon Dock, Tata Power, FCI and for other functions. - Held that - In case of DY. COMMISSIONER OF POLICE, JODHOUR Vs. CCE & ST 2016 (12) TMI 289 - CESTAT NEW DELHI the Tribunal has 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 set aside - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Liability of the Appellant for service tax under the category of "Security Agency Services."
2. Applicability of statutory and sovereign functions exemption to the Appellant.
3. Interpretation of the term "person" under the Finance Act, 1994 and its implications.
4. Relevance of C.B.E. & C. Circular No. 89/7/2006-S.T., dated 18-12-2006.
5. Precedent and binding nature of previous Tribunal and Supreme Court judgments.

Issue-wise Detailed Analysis:

1. Liability of the Appellant for Service Tax under "Security Agency Services":
The Appellant was providing security services to various entities, including banks and events like IPL and World Cup. A show cause notice was issued demanding service tax on the charges recovered for these services under the category of "Security Agency Services." The adjudicating authority confirmed the demand along with interest and penalties under sections 76, 77, and 78 of the Finance Act, 1994. The Appellant contested this demand, leading to the present appeal.

2. Applicability of Statutory and Sovereign Functions Exemption:
The Appellant argued that their activities were sovereign functions, as held in previous cases such as Dy. Commissioner of Police, Jodhpur 2017 (48) STR 275 and Dy. Inspector General of Police 2017 – 11-TMI-346. They claimed that police deployment for maintaining law and order is a sovereign function and thus not liable for service tax. The Tribunal found that the issue was not res-integra and had been settled in favor of the Appellant in previous judgments, where it was held that the service tax demand was not sustainable for such sovereign functions.

3. Interpretation of the Term "Person" Under the Finance Act, 1994:
The Tribunal examined whether the term "person" in the definition of "Security Agency" under Section 65(94) of the Finance Act, 1994, included the State or its officers. The Tribunal referenced the General Clauses Act, 1897, and the Supreme Court's judgment in West Bengal v. Union of India [AIR 1963 SC 124], which clarified that the term "person" does not include the State. Consequently, the Tribunal concluded that the Superintendent of Police, an agency of the State Government, does not fall within the term "person" and therefore cannot be considered a "Security Agency."

4. Relevance of C.B.E. & C. Circular No. 89/7/2006-S.T., dated 18-12-2006:
The Tribunal referred to the C.B.E. & C. Circular, which outlines conditions under which activities performed by sovereign/public authorities are exempt from service tax. The circular specifies that charges recovered for statutory and mandatory obligations are not liable for service tax. The Tribunal found that the Appellant's activities, such as deploying additional police force for public security and law and order, met these conditions. The charges were levied under Section 46 of the Police Act and deposited into the Government treasury, fulfilling the criteria for exemption.

5. Precedent and Binding Nature of Previous Tribunal and Supreme Court Judgments:
The Tribunal noted that the issue had been previously decided in favor of the Appellant in similar cases, and the judgments had been upheld by the Supreme Court. The Tribunal cited the case of DY. COMMISSIONER OF POLICE, JODHPUR Vs. CCE & ST 2017 (48) STR 275 (TRI), where it was held that the police department's activities were statutory functions and not liable for service tax. Given the binding nature of these precedents, the Tribunal concluded that the demand against the Appellant was not sustainable.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, holding that the Appellant's activities were sovereign functions exempt from service tax. The demand, interest, and penalties imposed by the adjudicating authority were deemed unsustainable.

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