2017 (11) TMI 346 - AT - Service Tax

Security services - levy of tax - whether providing armed security guards to public sector banks/undertakings and Govt. departments is to be covered under the definition of security services and collection of charges for the same will be liable to service tax under the Finance Act, 1994? Held that - CBEC has issued a Circular No. 89/7/2006-S.T., dated 18-12-2006 clarifies that wherever the charges collected by any sovereign public authority for carrying out any statutory function, the same is not liable to levy of service tax subject to three conditions - CESTAT in the case of Dy. Commissioner of Police & Others v. CCE, Jaipur & Others, 2016 (12) TMI 289 - CESTAT NEW DELHI concluded that the police department which is in the agency of State Government cannot be considered to be a person engaged in the business of running security services. It is on record that the appellant is depositing the money collected on account of the subject services in the Govt. treasury. It is also on record that the appellant is performing statutory function which is one of the three conditions of the CBEC Circular dated 18-12-2006 and it has also been claimed that the collection of the fee levied by the appellant is as per the provisions of relevant law. Appeal allowed - decided in favor of appellant

Summary

Issues:
1. Whether providing armed security guards to public sector banks/undertakings and Government departments falls under the definition of 'security services' for the purpose of service tax liability under the Finance Act, 1994.

Analysis:
The case involved an appeal by the Deputy Inspector General of Police against an Order-in-Original confirming a demand for service tax and penalty. The appellant, a part of the MP State Police force, provided armed security guards to public sector banks/undertakings and Government departments under Section 13 of the Police Act, 1861, collecting charges for the same. The central issue was whether these services qualified as 'security services' and were subject to service tax under the Finance Act, 1994.

The Tribunal considered that the appellant was fulfilling statutory duties and depositing the collected amount in the Government treasury. Referring to Circular No. 89/7/2006-S.T., the Tribunal highlighted three conditions exempting charges collected by sovereign public authorities from service tax: duties performed should be statutory, charges should be as per relevant law, and the amount should be deposited in the Government treasury. Additionally, a previous CESTAT decision concluded that police departments, as agencies of State Governments, were not engaged in the business of security services under the Finance Act, 1994.

The Tribunal noted that the appellant met the conditions specified in the Circular, depositing collected funds in the Government treasury and operating within the framework of relevant laws. Relying on the precedent set by the earlier CESTAT decision, the Tribunal set aside the impugned order, allowing the appeal. The judgment was pronounced on 10-3-2017 by the Tribunal members, Shri S.K. Mohanty and Ashok K. Arya.

This detailed analysis of the judgment showcases the Tribunal's interpretation of statutory duties, the applicability of service tax to security services provided by police forces, and the conditions exempting charges collected by sovereign public authorities from service tax under the Finance Act, 1994.