2021 (10) TMI 1075 - AT - Service Tax

Levy of service tax - security services or not - collection of charges providing armed security guards to public sector banks / undertakings and government departments - HELD THAT - The appellant is performing statutory duties and the amount so collected is being deposited in the government treasury. CBEC has issued a Circular No.89/7/2006-ST dated 18.12.2006 clarifying 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 if following three conditions are satisfied (a) Sovereign/public authorities perform duties which are in the nature of statutory and mandatory obligation to be fulfilled in accordance with the law. (b) The fee collected should be levied as per the provision of relevant law. (c) The amount collected is to be deposited into government treasury. Further, there is a CESTAT decision in THE DEPUTY COMMISSIONER OF POLICE JODHPUR, SUPERINTENDENT OF POLICE VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAIPUR- 2016 (12) TMI 289 - CESTAT NEW DELHI , where it was 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. The CESTAT in the said decision has held that the activity undertaken by the police is not covered by the definition of security agency under Section 64(94) of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.

Summary

Issues:
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.

Analysis:
The case involved an appeal by the Superintendent of Police (Rural) against an Order-in-Original passed by the Commissioner of Central Excise, Customs & Service Tax. The appellant, a part of the Maharashtra State Police force, provided armed security guards to public sector banks and government departments under the Police Act, 1861, for which charges were collected as consideration. The key issue was whether these services were to be considered 'security services' and thus liable for service tax under the Finance Act, 1994.

During the proceedings, both sides were represented, with the appellant being represented by a Chartered Accountant and the Revenue being represented by an Assistant Commissioner, Authorized Representative. After considering the facts and submissions, the Tribunal noted that the appellant was fulfilling statutory duties, and the collected amount was being deposited in the government treasury. Reference was made to a CBEC Circular clarifying that charges collected by sovereign public authorities for statutory functions were not liable to service tax if specific conditions were met.

Furthermore, the Tribunal cited a CESTAT decision and a Mumbai Bench Tribunal decision where it was concluded that police departments, as agencies of the State Government, were not engaged in the business of providing security services. The activities of the police were deemed outside the scope of the definition of security agency under the Finance Act, 1994. Based on these precedents, the Tribunal allowed the appeal and set aside the impugned order, ruling in favor of the appellant.

In conclusion, the Tribunal's decision was based on the interpretation of relevant laws, precedents, and the nature of services provided by the appellant. The case highlighted the distinction between statutory duties performed by public authorities and commercial activities subject to service tax, ultimately resulting in the appeal being allowed in favor of the appellant.