Taxability of security services and gross valuation include wages paid to personnel under commercial service contracts.

Security services provided by a corporation established for ex-servicemen welfare were treated as taxable security agency services where the activity was carried on under commercial agreements and generated profit. The welfare origin of the corporation did not exclude the services from the taxable category because the statutory framework permitted approved business activity. For valuation, the taxable value was the gross amount charged from clients, and no deduction was available for wages or salaries paid to security personnel employed by the service provider. The service tax framework and departmental circulars supported inclusion of such employer-side outgoings in the taxable amount.

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Issues: (i) Whether the appellant corporation, though created for the welfare of ex-servicemen, was rendering taxable security agency services on a commercial basis; (ii) whether, for levy of service tax, the value of taxable service included the full gross amount charged from clients, including wages and salary paid to security personnel.

Issue (i): Whether the appellant corporation, though created for the welfare of ex-servicemen, was rendering taxable security agency services on a commercial basis.

Analysis: The appellant's activities were found to be conducted under commercial agreements and to generate net profit from commercial activity. The statutory framework governing the corporation permitted it to carry on business, trade or activity approved by the Government, and Section 15 of the Punjab Ex-serviceman Act, 1978 indicated the commercial nature of the permissible business. On the facts, the services rendered fell within the statutory concept of a security agency and were not excluded merely because the corporation had a welfare origin.

Conclusion: The appellant was taxable as a security agency; this issue was decided against the assessee.

Issue (ii): Whether, for levy of service tax, the value of taxable service included the full gross amount charged from clients, including wages and salary paid to security personnel.

Analysis: Under the service tax charging and valuation provisions, the taxable value for security agency services was the gross amount charged by the agency from the client. The Board's circular clarified that no abatement was admissible for salary, wages, and other employer-side payments borne by the agency, as such outgoings arose from the employer-employee relationship and did not reduce the gross amount charged for the service. The agreements also showed that the appellant undertook security-related responsibilities and employed the personnel itself.

Conclusion: The full gross amount charged, including wages and salary payments, formed the taxable value; this issue was decided against the assessee.

Final Conclusion: The appeal failed on both the taxability and valuation challenges, and the service tax demand was upheld.

Ratio Decidendi: A provider of security services falls within the taxable category where the activity is carried on commercially, and the value of such taxable service is the gross amount charged from the client without deduction for salary or wages paid to personnel employed by the service provider.

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