2017 (2) TMI 1489 - AT - Service Tax

Tax Exemption for Security Services Upheld by Tribunal, Appellant Appeals Allowed

The Tribunal allowed the appeals filed by the assessee-Appellants, overturning the Commissioner of Customs & Central Excise, Jaipur-I's orders ... Taxability of security services provided by State police - Characterisation of fees as statutory fee not taxable - Definition of Security Agency under Section 64(94) of the Finance Act - CBEC Circular on fees collected by policeTaxability of security services provided by State police - Definition of Security Agency under Section 64(94) of the Finance Act - Characterisation of fees as statutory fee not taxable - CBEC Circular on fees collected by police - Levy of service tax on security services/verification charges collected by the police (State agency). - HELD THAT: - The Tribunal applied its earlier reasoning in Final Order No. ST/A/55321-55348/2016-Cus dated 25.11.2016 and held that the police department, being an agency of the State Government, cannot be treated as a 'person' engaged in the business of running security services so as to fall within the definition of 'Security Agency' under Section 64(94). The fees collected by the police department were held to be in the nature of statutory fees for performing statutory functions and are deposited into the Government treasury; in light of the CBEC Circular on the subject and the Tribunal's prior decision, such receipts are not leviable to service tax. The Constitutional challenge and authorities cited on Sea Customs Act validity were noted as not being determinative for the present issue. Following the cited earlier decision (paras. 13-14 of that order as reproduced), the Tribunal set aside the impugned orders and allowed the appeals. [Paras 6, 7, 8]Impugned orders set aside and appeals allowed; service tax not leviable on the security/verification charges collected by the State police as they are statutory fees and the police is not a 'Security Agency' within Section 64(94).Final Conclusion: Appeals allowed; impugned orders set aside. The Tribunal held that the police (a State agency) does not fall within the definition of a taxable 'Security Agency' and that the fees collected are statutory in nature and not subject to service tax. Issues:Appeal against Order-in-Appeal by Commissioner of Customs & Central Excise; Tax liability on security services; Constitutional validity of Sea Customs Act; Levy of service tax on State Police services.Analysis:The Appellants challenged Order-in-Appeal by the Commissioner of Customs & Central Excise, Jaipur-I regarding the tax liability on security services provided by the assessee for commercial consideration. The Department had imposed service tax on these services, leading to the appeals. The Department justified its orders citing the Constitutional Bench of the Supreme Court's observation on the exclusive power of Union Parliament to regulate trade and commerce, emphasizing the distinction between direct and indirect taxes. However, the Tribunal noted that the Constitutional validity of the Sea Customs Act, as examined by the Supreme Court, was not a relevant issue in the present case.In a previous case involving the same Appellant, the Tribunal had ruled that the police department, as an agency of the State Government, did not fall under the definition of a 'person' engaged in the business of security services. The fees collected by the police department were considered as fees for performing statutory functions and were deposited into the Government treasury, exempting them from service tax as per a CBEC Circular. The Tribunal also highlighted that previous case laws did not directly address the issue of levying service tax on State Police services.Based on the precedent set in the previous case involving the same Appellant, where the Tribunal ruled in favor of the Appellant regarding the levy of service tax on State Police services, the impugned orders were set aside, and the appeals were allowed. Consequently, all appeals filed by the assessee-Appellants were allowed, overturning the Commissioner's orders.