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of <h1>Levy of service tax on Security Agency Services police statutory security not business; appeals allowed.</h1> Levy of service tax on security agency services is addressed by distinguishing commercial security providers from police performing statutory functions. ... Levy of service tax - Security Agency Services - service tax can be demanded from the Police Department (appellant) in relation to certain security services provided to some individual and institutions, pursuant to certain Government circulars as well as court directives or otherwise - HELD THAT:- The similar issue come up before Co-ordinate Bench in the case of Superintendent of Police Vs Commissioner of Central Goods and Service Tax, Excise and Customs, Indore [2023 (12) TMI 1487 - CESTAT NEW DELHI]. The Tribunal examined the scope of SAS and relied on certain judgments including the judgment of Superintendent of Police, Swai Madhopur Vs Commissioner of Central Excise, Jaipur [2019 (11) TMI 250 - CESTAT NEW DELHI] where it was held that a perusal of the definition of “Security Agency” shows that it has to be “any person engaged in the business of providing security”. Police provide security as a part of their statutory obligations. In most cases they do not charge any fee for such security but in some cases they charge a fee as determined by the State Government. Merely because they are charging a fee, Police do not become “person engaged in the business of providing security”. As per clarification issued by the CBEC Circular No. 89/07/2006-ST dated 18/12/2006 charges recovered by any sovereign or public authority for carrying out any statutory function will not be liable for service tax fees if three conditions are fulfilled. The Co-ordinate Benches of this Tribunal in catena of judgments have taken similar views that merely because the Police may charge a fee, it would not become a person engaged in the business of providing security and therefore service tax can be charged under the aforesaid category. In this regard, reliance is also placed on the judgment of Tribunal in the case of Commander Punjab Home Guards and Ors. Vs Commissioner of Central Excise and Service Tax, Ludhiana and Ors. [2024 (11) TMI 1224 - CESTAT CHANDIGARH] - the Tribunal framed the question as to whether the State Police represented by Superintendent of Police would be covered within the definition of Security Agency Services and thereafter examined various circulars/instructions etc., and scope of definition of the service as well as modalities for providing such security to came to the conclusion that such services are statutory functions. The impugned order cannot be sustained and appeal must be allowed. Issues: Whether service tax under the category of Security Agency Services can be levied on amounts collected by the State Police for providing security personnel where such deployment is pursuant to statutory provisions or government notifications and the amounts are deposited into the Government treasury.Analysis: The Tribunal examined the definition of Security Agency Services under Section 65(94) of the Finance Act, 1994 and the CBEC Circular No. 89/7/2006-S.T. The court considered whether the Superintendent of Police is a 'person engaged in the business of providing security' and whether recovery of charges for additional police deployment amounts to a commercial/business activity. It analysed (i) the nature of the Police's duty as statutory/sovereign functions, (ii) the levy of charges under Section 46 of the Police Act and state notifications prescribing user charges, and (iii) the deposit of such amounts into the Government treasury. Applying the three conditions in the CBEC circular statutory/mandatory duty, fee levied as per law, and deposit into Government treasury the Tribunal found all conditions satisfied. Coordinate-bench precedents and statutory interpretation of 'person' were relied upon to conclude that State Police performing statutory functions do not become a taxable security agency merely by collecting user charges.Conclusion: Service tax is not leviable on amounts collected by the State Police for deployment of additional police personnel under statutory provisions and prescribed notifications where such amounts are deposited into the Government treasury; the impugned demand is set aside in favour of the assessee.
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