2021 (7) TMI 195 - AT - Service Tax

Government entity providing statutory functions exempt from service tax under Finance Act, 1994 - Precedent upheld

The Commandant Home Guard Training Centre, Kir Khera Chittorgarh Versus Commissioner of Central Goods And Service Tax, Excise, Customs, Udaipur

The Tribunal held that the government entity, a Commandant of Home Guards, does not qualify as a 'security agency' under the Finance Act, 1994. The ... Levy of Service Tax - security agency service or not - Home Guards department - scope of the term ‘person’ - It is the case of the appellant that the term ‘person’ does not include the Government or Governmental entities and, therefore, they are not covered by the definition of security agency - HELD THAT:- The term ‘person’ appearing in the definition must be construed to be a natural person and by no stretch of imagination will include the State or its officers or the posts created under a statute as held by the Constitution Bench of the Hon’ble Supreme Court in the case of STATE OF WB. PLAINTIFF VERSUS UOI. [1962 (12) TMI 64 - SUPREME COURT]. Since State cannot be a person, it cannot be a “security agency”. Therefore, no service tax under the head security agency service can be charged on the amounts collected by the Police or Home Guards or any officers of the Government for providing security. The appellant is not liable to pay service tax - Appeal allowed - decided in favor of appellant. Issues Involved:1. Whether the appellant, a government entity, qualifies as a 'security agency' under Section 65(105)(w) of the Finance Act, 1994.2. Whether the services provided by the appellant are subject to service tax.3. Interpretation of the term 'person' in the context of the Finance Act, 1994.4. Applicability of service tax on statutory functions performed by sovereign/public authorities.Issue-wise Detailed Analysis:1. Qualification as a 'Security Agency':The primary issue is whether the appellant, a Commandant of Home Guards in Rajasthan, qualifies as a 'security agency' under Section 65(105)(w) of the Finance Act, 1994. The Revenue argued that since the appellant provides security services and collects consideration, it falls under the definition of 'security agency service,' which after 1.5.2006 includes 'any person' providing such services. The appellant contended that the term 'person' does not include government entities, and hence, they should not be classified as a security agency.2. Liability to Pay Service Tax:The Revenue's stance was that the appellant, by providing security services for a fee, is liable to pay service tax. They referenced Circular No. 96/7/2007-ST dated 23.8.2007, which clarifies that if a sovereign authority provides a service not in the nature of a statutory activity, it is subject to service tax. Conversely, the appellant argued that their services are statutory and thus exempt from service tax.3. Interpretation of 'Person':The appellant argued that the term 'person' should be interpreted as a natural or juristic person and not include the state or its officers. They cited the Supreme Court's judgment in West Bengal Vs. Union of India [AIR 1963 SC 124], which held that the term 'person' does not include the state. The Tribunal agreed, stating that the state cannot be a 'person' and therefore cannot be a 'security agency.'4. Applicability of Service Tax on Statutory Functions:The Tribunal reviewed whether the services provided by the appellant are statutory functions. They referenced the C.B.E. & C. Circular No. 89/7/2006-S.T., which states that fees collected for statutory duties are not subject to service tax. The Tribunal found that the fees collected by the appellant for providing additional police force are in line with statutory provisions under Section 46 of the Police Act and are deposited into the government treasury. Thus, these activities are statutory functions and not subject to service tax.Conclusion:The Tribunal concluded that the appellant, being a government entity, does not qualify as a 'security agency' under the Finance Act, 1994. The services provided are statutory functions, and the fees collected are in the nature of statutory fees, not subject to service tax. The Tribunal's decision was aligned with the Supreme Court's judgment in Deputy Commissioner of Police, Jodhpur Vs. Commissioner of Central Excise & Service Tax, which upheld that government entities performing statutory functions are not liable to pay service tax. Consequently, the appeal was allowed, and the impugned order was set aside with consequential relief.