Sovereign police security services outside service tax when charges are collected under law and credited to the treasury.

Charges collected by the Police Department for security services provided on request, where the levy was fixed under the governing police law and remitted to the Government treasury, were treated as part of its statutory and sovereign functions for public security, peace and order. The binding CBEC circular was applied to clarify that amounts recovered by a sovereign or public authority for performing statutory functions are not liable to service tax when the prescribed conditions are met. On those facts, the Police Department was not regarded as a person engaged in the business of providing security, the activity did not fall within Security Agency Services, and service tax was not leviable.

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Issues: Whether the Police Department, while providing security on request and recovering charges fixed under the governing police law and credited to the Government treasury, could be treated as a person engaged in the business of providing security so as to attract service tax under Security Agency Services.

Analysis: The service in question was found to be part of the police force's statutory and sovereign obligations for public security, peace and order. The charges were levied under the relevant police law and notifications, and the amounts collected were deposited in the Government treasury. The binding CBEC circular further clarified that amounts recovered by a sovereign or public authority for performing statutory functions are not liable to service tax where the prescribed conditions are satisfied. On these facts, the police department was not regarded as a person engaged in the business of providing security, and the activity did not fall within the taxable definition.

Conclusion: Service tax was not leviable on the security charges collected by the Police Department, and the demand was unsustainable.

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