2022 (3) TMI 328 - AT - Service Tax

Levy of service tax - Security Agency Service or not - police personnel supplied to public departments, private companies and persons etc. - statutory fee or levy or otherwise? - HELD THAT - In this case, the appellant is a Police Department governed by the State of Kerala. The appellant is discharging the function of security of property and person. Apart from that, appellant is providing certain security personnel to certain Government agencies, Central/State, public sector undertakings and other private persons and charging the amount as provided under Section 8 of the Kerala State Police Act. The amounts so recovered have been deposited into Government treasury under different heads. Whether providing armed security guards to public sector undertakings, State/Central Government Departments or other persons is covered under Security Agency Service or not? - HELD THAT - The issue is decided in the case of THE SUPERINTENDENT OF POLICE VERSUS C.C.E,S.T. - BHAVNAGAR 2018 (8) TMI 1103 - CESTAT AHMEDABAD 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. Thus, the appellants are not liable to pay service tax being appellants are discharging sovereign functions in terms of Kerala State Police Act. Therefore, demand of service tax is not sustainable against the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant, a police department, providing armed security guards to various entities is liable to pay service tax under Security Agency Service.

Analysis:

Issue 1: Liability to Pay Service Tax
The appellant, a police department, provided police guards to various entities and collected fees for the service. The issue was whether providing armed security guards falls under Security Agency Service and is subject to service tax. The appellant argued that they were not engaged in a business activity but were providing police protection as a sovereign function of the State. The appellant cited relevant case laws and Circulars to support their argument. The Tribunal examined the nature of the appellant's activities and previous decisions. They noted that the charges collected for statutory functions by sovereign public authorities, as in this case, are not liable for service tax if specific conditions are met. The Tribunal referred to a CESTAT decision and a Mumbai Bench decision supporting the view that police departments providing security services are not covered under Security Agency Service. Therefore, the Tribunal held that the appellant, as a police department discharging sovereign functions under the Kerala State Police Act, was not liable to pay service tax. The demand for service tax against the appellant was deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief as per the law. The judgment was pronounced on 02/03/2022 by the Appellate Tribunal CESTAT Bangalore, with detailed analysis and references to relevant legal provisions and precedents.