Statutory police deployment is not a commercial security agency service and is outside service tax liability.

The police department's deployment of personnel on payment basis under statutory authority was not a commercial security agency service liable to service tax. The activity was carried out under the Rajasthan Police Act, 2007 and relevant notifications, with charges deposited into the Government treasury, showing a sovereign public function rather than business rendered for consideration. Because a security agency must be engaged in the business of providing security-related services, the statutory police deployment fell outside section 65(94) of the Finance Act, 1994. The service tax levy was therefore not sustainable.

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Issues: Whether the police department, while deploying personnel on payment basis under statutory authority and depositing the charges in the Government treasury, was engaged in the business of providing security agency services so as to attract service tax under section 65(94) of the Finance Act, 1994.

Analysis: The definition of security agency covers a person engaged in the business of rendering security-related services. The police department functions under a statutory mandate and performs sovereign duties for maintenance of law and order, public peace, public security and related responsibilities. The charges recovered for deployment of additional police force were prescribed under the Rajasthan Police Act, 2007 and the relevant notifications, and the amounts were deposited into the Government treasury. In light of the statutory framework and the CBEC circular on sovereign/public authorities, such activity was not a commercial security service rendered for consideration but a statutory function performed in public interest.

Conclusion: The levy of service tax was not sustainable, as the police department was not a security agency engaged in business within the meaning of section 65(94) of the Finance Act, 1994.

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