Police Department Providing Armed Security Guards Not Liable for Service Tax

The Appellate Tribunal CESTAT Bangalore held that a police department providing armed security guards to various entities is not liable to pay service tax under Security Agency Service. The Tribunal found that the appellant, as a police department discharging sovereign functions under the Kerala State Police Act, was not engaged in a business activity subject to service tax. Citing relevant case laws and Circulars, the Tribunal determined that charges collected for statutory functions by sovereign public authorities are not taxable under service tax laws. The Tribunal set aside the demand for service tax against the appellant, providing consequential relief in accordance with the law.

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Issues:
Whether the appellant, a police department, providing armed security guards to various entities is liable to pay service tax under Security Agency Service.

Analysis:

Issue 1: Liability to Pay Service Tax
The appellant, a police department, provided police guards to various entities and collected fees for the service. The issue was whether providing armed security guards falls under Security Agency Service and is subject to service tax. The appellant argued that they were not engaged in a business activity but were providing police protection as a sovereign function of the State. The appellant cited relevant case laws and Circulars to support their argument. The Tribunal examined the nature of the appellant's activities and previous decisions. They noted that the charges collected for statutory functions by sovereign public authorities, as in this case, are not liable for service tax if specific conditions are met. The Tribunal referred to a CESTAT decision and a Mumbai Bench decision supporting the view that police departments providing security services are not covered under Security Agency Service. Therefore, the Tribunal held that the appellant, as a police department discharging sovereign functions under the Kerala State Police Act, was not liable to pay service tax. The demand for service tax against the appellant was deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief as per the law. The judgment was pronounced on 02/03/2022 by the Appellate Tribunal CESTAT Bangalore, with detailed analysis and references to relevant legal provisions and precedents.

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