2018 (10) TMI 162 - AT - Service Tax

Security Agency Service - guarding the suit properties - assessee appointed by the Court Receivers (CR) of Hon ble High Court, Mumbai and / Debt Recovery Tribunal - whether the security services provided by the appellants can be termed as sovereign function of the state and there is any specific exemption provided in the service tax statute for not taxing the said service? - Held that - The facts are not in dispute that the appellants were engaged by the CR for providing taxable services and in no way, they were connected with the banks / financial institution, who ultimately reimbursed the expenses to the CR as per the applicable rules and instructions of the Court. Thus, the CR appointed by the Court for guarding the suit records cannot be considered as client of the appellant, in order to fall under the category of Security Agency Service. In this case, the service receiver is the CR, who performs the judicial functions as per the Court. Hence the activity undertaken by the appellant can be considered as sovereign function of the States in as much the Hon ble Court performs according to the mandates of the constitution of India. Appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of whether the services provided by the appellants fall under the taxable category of "Security Agency Service" as per Section 65(105)(w) of the Finance Act, 1994. The dispute regarding the appellants being appointed by Court Receivers (CR) for guarding suit properties and whether the CR should be considered the "client" for the appellants to fall under the Security Agency Service. The contention of the Revenue that the services provided should be taxable under the Security Agency Service category and that the proceedings are not barred by limitation.

Analysis:
The appeals were directed against an order passed by the Commissioner (Appeals), Central Excise and Service tax, Mumbai, regarding the appellants being appointed by Court Receivers (CR) for guarding suit properties. The department interpreted the activities as falling under the taxable category of "Security Agency Service." The Commissioner (Appeals) set aside the demand confirmed on the appellants, stating that the CR appointed by the Court should not be considered the "client" for the appellants to fall under the Security Agency Service. The Commissioner relied on previous Tribunal decisions, emphasizing the absence of a nexus between the service providers and the client for levy of tax under this service category. Additionally, the Commissioner set aside the adjudication orders on the ground of limitation.

During the proceedings, it was established that the appellants were engaged by the CR for providing taxable services and were not connected with the banks or financial institutions that reimbursed the expenses to the CR. The Tribunal concluded that the CR, performing judicial functions as per the Court, should be considered the service receiver, not the client of the appellants. The Tribunal reasoned that the activity undertaken by the appellants could be considered a sovereign function of the State, as the Court operates according to the mandates of the Indian constitution. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) to set aside the adjudication orders on merits.

In the final judgment, the Tribunal found no merits in the appeals filed by Revenue and dismissed them after setting them aside. The Tribunal's decision was based on the understanding that the CR, not the banks or financial institutions, was the service receiver, and the activities performed by the appellants could be considered a sovereign function of the State. The judgment was pronounced in court, concluding the case.