2015 (12) TMI 877 - AT - Service Tax

Waiver of pre deposit - levy of service tax - security service by Police Forces of the State - Held that - prima facie, the consideration amounts to income of the State of Rajasthan which is excluded from the purview of the taxation jurisdiction of the Union vide Article 289 of the Constitution. We also notice that C.B.E. & C. Circular Nos. 87/7/2006-S.T., No. 96/7/2007-S.T. and No. 98/1/2008-S.T., dated 18-12-2006, 23-8-2007 and 4-1-2008 also clarify that such consideration received for providing security service by Police Forces of the State which is remitted to the Government account, is not liable to tax - Stay granted.

Summary

Issues:
- Appeal against demand of service tax on security services provided by the appellant.
- Exclusion of consideration as income of the State of Rajasthan under Article 289 of the Constitution.
- Clarifications provided by C.B.E. & C. Circulars regarding non-taxability of consideration remitted to Government account for security services by Police Forces.

Analysis:
1. The appeal was lodged challenging the service tax demand imposed on the appellant for providing security services, as confirmed by the Commissioner (Appeals), Jaipur. The services were categorized as falling under Section 65(105)(w) read with Section 65(94) of the Finance Act, 1994. It was observed that the services were seemingly provided by the Police forces of the State of Rajasthan, with user charges collected from service recipients under the Rajasthan Police Act, 2007. The Act empowered the State to recover costs incurred on Police officers' deployment from individuals requesting such services, along with levying user charges on those engaging in activities necessitating additional police presence for public security or peace maintenance.

2. The Tribunal deliberated on the nature of the consideration received, noting that it essentially constituted income of the State of Rajasthan. This income was deemed exempt from Union taxation jurisdiction as per Article 289 of the Constitution. Furthermore, reference was made to Circulars issued by the Central Board of Excise and Customs (C.B.E. & C.) - specifically Circular Nos. 87/7/2006-S.T., 96/7/2007-S.T., and 98/1/2008-S.T. - dated 18-12-2006, 23-8-2007, and 4-1-2008, respectively. These Circulars clarified that consideration received for security services provided by State Police Forces, which is remitted to the Government account, does not attract tax liability.

3. Consequently, based on the aforementioned considerations and legal provisions, the Tribunal granted a full waiver of pre-deposit and stayed any further proceedings related to the assessed tax liability, interest, and penalties. This stay was to remain in effect until the appeals were conclusively disposed of, ensuring that the appellant was not subjected to immediate financial obligations pending the final resolution of the appeals.