2026 (1) TMI 494 - HC - Service Tax

Police services under government orders treated like security agency work; service tax demand for 2006-2011 quashed

Police services provided under State statutes and Government Orders, though functionally akin to a 'security agency' service, were held not taxable to ... Exemption from the levy of service tax - sovereign functions - Seeking a declaration that the activities of the petitioner (the Greater Chennai Police Commissionerate ) rendered under the Tamil Nadu District Police Act, 1859, the Chennai Police Act, 1888 and Government Orders issued by the State of Tamil Nadu, are outside the scope of Chapter V and VA of Finance Act, 1994 in terms of which Service tax is levied. HELD THAT:- The services rendered admittedly fall with the ambit of the definition of 'security agency'. The State has been issuing Government Orders over the years (i) GO No.3022 dated 10.12.1979, (ii) GO No.215 dated 31.01.1986, (iii) GO No.299 dated 11.02.1987, (iv) GO No.919 dated 11.08.2008, (v) GO No. 949 dated 06.11.2009 and GO No. 249 dated 21.03.2017). The G.O.s., provide for the collection of charges from service recipients and the tariff set out under GO No.949 dated 06.11.2009. The rates fixed as per the tariff constitute a reimbursement of the amounts payable to the police personnel for their regular services. However, no computation is available in support of the same. The above tariff indicates that the quantum of payment for the deputation of the officer is specific, and includes various components of pay - the High Court is unaware as to whether the amounts contain some amount of profit over and above the charges payable to the officers for regular duties. Being a question of fact, and moreover, as it does not impact the decision in this case, we are not inclined to render a finding in this regard. The definition of ‘person’ upon whom liability of service tax was to be fastened, as it stood for the period in question, being May, 2006 to December, 2011, did not include the Government. Hence, one would adopt the definition of ‘person’ under the General Clauses Act - Hence, at the relevant point in time and for the period in question therefore, the Government was not an entity liable to tax. On this short ground, the petitioner succeeds. As far as the period post 01.06.2012 is concerned, the question of taxability is left open - the present writ petitions are decided only on the question of assumption of jurisdiction and have not decided any of the other points that have been agitated by the petitioners. Hence the liability of the petitioner for service tax for the period subsequent to 01.07.2012 is not a subject matter of decision in these writ petitions. The order dated 14.10.2015 is quashed - petition allowed. Issues: (i) Whether the services rendered by the Greater Chennai Police Commissionerate (bundobast/security/escort services) for the period May 2006 to December 2011 fall within the scope of service tax under Chapter V/VA of the Finance Act, 1994.Analysis: The Court examined whether the police services in question are part of sovereign functions and whether, for the period in question, the statutory definition of 'person' liable to service tax included the Government. The Court found that the services rendered were in the nature of public/sovereign functions and noted that under the statutory scheme applicable for May 2006 to December 2011 the definition of 'person' did not include the Government, so government entities were not liable to service tax during that period. The Court referred to prior decisions (including the Supreme Court dismissal of appeal in the Jodhpur police matter) addressing similar factual and legal issues, but expressly left open the question of taxability for the period after the definition of 'person' was amended effective 01.06.2012.Conclusion: The challenge succeeds in favour of the petitioner for the period May 2006 to December 2011; the impugned Order dated 14.10.2015 is quashed insofar as it seeks to fasten service tax liability for that period.