Government of Tripura's ONGC security arrangement with State Rifles battalion not taxable under Section 65(94) Finance Act 1994

CESTAT Kolkata held that the Government of Tripura's arrangement with ONGC to deploy Tripura State Rifles battalion for security services does not constitute taxable security services under Section 65(94) of Finance Act, 1994. Following precedent from Mumbai Police case, the tribunal ruled that police activities fall outside the definition of Security Agency under the Act. Since the appellant was not engaged in business of providing security services, they were not liable for service tax. The demand was set aside and appeal allowed.

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Issues Involved:
1. Classification of services provided by the appellant.
2. Liability to pay service tax under the category of "Security Services."
3. Applicability of statutory and constitutional duties exemption.

Summary:

Issue 1: Classification of Services Provided by the Appellant

The Government of Tripura entered into a memorandum of understanding with ONGC for providing security services through the Tripura State Rifles. The appellant received remuneration for these services. The Revenue classified these activities under "Security Services" and initiated proceedings to demand service tax.

Issue 2: Liability to Pay Service Tax Under the Category of "Security Services"

The appellant contested the classification, arguing that as a Government of India Undertaking, the remuneration received went to the Government Treasury, and they were not engaged in any business of providing security services. They claimed exemption from service tax under Section 65 (94) of the Finance Act, 1994. However, the adjudicating authority confirmed the demand for service tax against the appellant.

Issue 3: Applicability of Statutory and Constitutional Duties Exemption

The Tribunal referred to the case of Mumbai Police Vs. Commissioner of Service Tax, Mumbai, where it was held that the State Police, being a sovereign authority, is not engaged in the business of running security services. The Tribunal observed that the activities performed by sovereign/public authorities under statutory duties, where the fee collected is deposited in the Government Treasury, are not liable for service tax. The Tribunal concluded that the appellant, similar to the police department, is not engaged in the business of providing security services and is outside the purview of security services as defined under Section 65 (94) of the Finance Act, 1994.

Consequently, the Tribunal set aside the impugned demand and allowed the appeals with consequential relief, if any.

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