Police department security services to banks are outside Security Agency Service tax when performed as sovereign statutory functions.

Services rendered by a police department in providing security to banks are not taxable as Security Agency Service under the Finance Act, 1994. The department acts as an agency of the State performing sovereign and statutory functions, not as a commercial security provider, and the fees collected are statutory fees credited to the government treasury. A CBEC circular was noted as consistent with the view that sovereign public authorities discharging statutory obligations are not exigible to service tax. The activity was therefore held outside the levy of service tax.

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Issues: Whether the services rendered by the police department in providing security to banks are taxable as Security Agency Service under Section 65(94) of the Finance Act, 1994 read with Section 65(105)(w) of the Finance Act, 1994.

Analysis: The issue was treated as covered by prior decisions holding that a police department, being an agency of the State Government, performs sovereign and statutory functions and is not engaged in the business of providing security services in the commercial sense. It was also noted that the fees collected are in the nature of statutory fees deposited in the government treasury, and the CBEC circular clarifies that activities performed by sovereign public authorities in discharge of statutory obligations are not exigible to service tax.

Conclusion: The activity is not taxable as Security Agency Service and service tax could not be levied on the impugned services.

Ratio Decidendi: Activities carried out by a police department in discharge of sovereign statutory functions are not services rendered as a commercial security agency and are outside the levy of service tax.

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