2024 (12) TMI 1305 - HC - Service Tax

Levy of service tax - security agency service - scope of commercial concern - whether or not the appellant would satisfy the definition of a commercial concern engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner ? HELD THAT - It is is clear from reading of the definitions of Security Agency and Taxable service, that to attract the levy of tax as applicable to the security agency services, the service has to be provided by a commercial concern engaged in the business of rendering services relating to security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel. It cannot be disputed that the activity that the appellant provides is essentially the providing of security personnel, who invariably are its members, being ex-servicemen. The only other issue that needs to be considered is whether the appellant would satisfy the definition of a commercial concern engaged in the business of rendering the security agency services. In this connection, it is noted that a commercial concern albeit not defined under the Act or in the Rules, has been understood by the Central Board of Excise and Customs, as an institution/establishment that is primarily engaged in commercial activities, having profit as the primary aim. The Circular No. 86/4/2006-ST dated 01.11.2006 issued in this connection goes on to clarify that it is not one/few isolated activities which determine whether or not an institution is a commercial concern but it is the totality of its activity and the objective of its existence that determines the commercial nature of an institution as an entity or a concern. The said Circular which basically considers the applicability of service tax to educational institutes like IITs and IIMs, goes on to clarify that the principal activity of institutes like IITs and IIMs being the imparting of education without the objective of making profit, the said institutes cannot be seen as commercial concerns, even if for some of their activities they charged a fee. Conclusion - The appellant cannot be treated at par with educational institutions, which by their very nature and going by the activities intended to be performed by them, cannot be seen as commercial concerns. It cannot be accepted that the appellant is not a commercial concern for the purposes of levy of service tax - the impugned order need not be interfered. Appeal dismissed.

Summary

Issues:
Appeals against a common order dated 12.12.2017 of the Customs, Excise and Service Tax Appellate Tribunal, Bangalore involving the registration of a charitable society under the head of "security agency service" as per the Finance Act, 1994.

Detailed Analysis:

1. Background and Facts:
The appellant, a Charitable Society registered under the Travancore Cochin Society Registration Act, 1955, affiliated to the Indian Ex-Service League, was asked to register as a service provider under "security agency service" by the Customs Department. The issue arose from notices issued in 1998, and subsequent proceedings led to appeals before the Appellate Tribunal.

2. Appellant's Arguments:
The appellant contended that its services were non-commercial, focusing on welfare matters of ex-servicemen and their families. It argued that the Circular dated 10.06.1985 recognized its non-commercial basis, providing opportunities to members without profit motives. The appellant highlighted its role in guiding members for placements and taking responsibility for security contracts without intending to make a profit.

3. Respondent's Submission:
The respondent argued that the Appellate Tribunal considered the appellant's submissions, statutory provisions, and judgments to conclude that the services provided fell under the tax liability as per the Finance Act, 1994, related to security agency services.

4. Judgment and Analysis:
The Court analyzed the definitions of "Security Agency" and "Taxable Service" under the Finance Act, 1994. It noted that for tax levy on security agency services, the service must be provided by a commercial concern engaged in security-related services. The Court clarified that a commercial concern engages primarily in profit-oriented commercial activities. Referring to Circular No. 86/4/2006-ST, the Court emphasized that the totality of activities and objectives determines the commercial nature of an entity.

5. Conclusion:
The Court held that the appellant, despite not making profits in certain years, embarked on commercial activities with a profit objective, making it a commercial concern liable for service tax. It distinguished the appellant from educational institutes, stating that the appellant's income-earning transactions classified it as a commercial venture. Consequently, the Court dismissed the appeals, upholding the Appellate Tribunal's order.

In summary, the Court upheld the tax liability on the appellant as a commercial concern engaged in security agency services, emphasizing the profit motive and totality of activities to determine commercial nature.