Security services provided by police are not taxable as security agency service, so related tax demand and penalty are disallowed.

Whether consideration for security escort and detective services provided by police constitutes taxable 'security agency' service was addressed by reference to binding precedents; applying that legal framework the service is not taxable as security agency service, so the service-tax demand is set aside. Because the tax demand fails, any penalty founded on that demand cannot be imposed and is dismissed. The operative effect is non-taxability of police provided security escort/detection services and nullification of attendant tax and penalty liabilities.

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Issues: Whether the service of security escort/detecting agency provided by the Police Commissioner and the consideration received therefor is liable to service tax under security agency service.

Analysis: The Tribunal noted that the issue is no longer res integra in view of binding and persuasive precedents, including a decision affirmed by the Supreme Court and relevant CESTAT decisions, which hold that security services provided by police departments to various agencies and the consideration received are not taxable as security agency service. Applying that legal framework, the Tribunal found no basis to sustain the demand of service tax; since the tax demand falls, any penalty consequential to that demand cannot be imposed.

Conclusion: The demand of service tax is set aside and the assessee's appeal is allowed; consequentially the Revenue's appeal for imposition of penalty is dismissed and no penalty can be imposed.

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