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2016 (12) TMI 289

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.... in the name of Superintendent of Police of various districts in the State of Rajasthan. Service tax demands have been made against the police department on the basis of the view entertained by Revenue that the police department has provided Security Agency Service covered under Section 65(105)(w) read with Section 65(94) of the Finance Act, 1994. 2. The brief facts of the case are summarized below:- (i) Superintendents of Police of various districts in the State of Rajasthan are alleged to have been engaged in providing Security Agencys services covered under Section 65 (105)(w) of Finance Act, 1994 without having the registration for the services. As per Section 65(94) of the Finance Act, 1994, Security Agency means any person engaged in the business of rendering services relating to the security of any property, whether movable or immovable, or of any person, in any manner and includes the services of investigation, detection or verification, of any fact or activity, whether of a personal nature or otherwise, including the services of providing security personnel. (i) As per Section 65(105)(w) of the Finance Act, 1994 taxable service means any service provided or to be prov....

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....on 75 of the Finance Act, 1994 and also penalties under various Sections of the Finance Act 1994. The Show Cause Notices culminated in the issue of the impugned orders which stand challenged before us in the present proceedings. 3. The main grounds of appeals are summarised below: (i) The term personappearing in the definition of Security Services will not include the State and instrumentalities thereof. Hence no Service Tax is payable by the State governments. (ii) State Police cannot be said to be engaged in the business of Security Services. Since being engaged in the business of Security Services is a condition precedent, there is no service tax liability.  (iii) They are not engaged in the business of rendering services relating to security. (iv) The Central Board of Excise and Customs has dealt with the issue of levy of service tax on the charges recovered by any sovereign/public authority carrying out any statutory function in their Circular no. 96/7/2007-ST dated 23.8.2007 wherein it has been clarified that no service tax would be payable if all the following conditions are satisfied:- (a) Sovereign / public authorities perform duties which are in the nature....

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....aced with any person. After such amendments, the security services provided by the Govt. departments also would stand covered for levy of service tax. The police departments have provided such services on cost recovery basis to individuals, to safeguard property, banks, etc. which would be squarely covered within the amended definition of security agency service and consequently service tax is liable to be paid. He further submitted that in the case of Central Industrial Security Forces (CISF), which also provides security services to various Central Govt. establishments including Govt. departments, CBEC has clarified that such services would fall within the purview of Security Agency Serviceand CISF has been discharging service tax liability thereon. The CBEC vide its circular No.137/131/2010, dated 20.05.2011 has clarified that the services provided by the State Police to banks and other establishments could not be stated to be a statutory and sovereign function and therefore such services are liable to service tax. He further cited the case laws of Kerala High Court decision in the case of Secretary to Govt., Dept. of Agriculture, Kerala Vs. Union of India [2015 (40) STR 438 (Ke....

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....he Constitution Bench of the Hon'ble Supreme Court in the case of West  Bengal  Vs.  Union  of  India  [AIR  1963  SC 124] in which the Apex Court has held as under:- the definition is an enlargement of the natural meaning of the expression person, even the extended meaning does not include the State. Their submission is that Superintendent of Police is an authority of the State Govt. to carry out statutory and constitutional duties. The definition of the term person, (which does not cover the Govt.) in the General Clause Act, 1897 is given as follows:- 42. Personshall include any company or association or body of individuals, whether incorporated or not, In the light of the definition of the term person in the General Clause Act, 1897, which has also been examined and clarified by the apex court, it would appear that the Superintendent of Police, which is an agency of the State Govt. does not appear to be covered within the term person. It is also noteworthy that in the year 2012 when the pattern of levy of service tax was changed and the concept of negative list was introduced with effect from 01.07.2012, a definition was introduce....

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....following conditions are satisfied:- (a) Sovereign / public authorities perform duties which are in the nature of statutory & mandatory obligation to be fulfilled in accordance with the law. (b) The fee collected should be levied as per the provision of relevant law. (c) The amount collected is to be deposited into government treasury. The satisfaction of each of the above three conditions is analysed below:- (i) A sovereign/public authority performs duties which are in the nature of statutory and mandatory obligation to be fulfilled in accordance with law. The Superintendent of Police is an extended arm/ instrumentality/ agency of the State Government and is controlled and managed by the State Government. It is carrying out the activities as entrusted to it vide the Police Act which are statutory and constitutional in nature. The Appellant is required to discharge these statutory obligations for public security and maintenance of public peace and order. The appellant cannot carry out any activity beyond the legislative competence. The user charges are levied by the State Government for the deployment of Police Force for the maintenance of public peace, security and la....

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....ove Section of the Act. The amounts so collected are mandatorily deposited into the Govt. treasury. Accordingly, they have submitted that all the conditions stipulated by the CBEC circular are satisfied and consequently the activities are to be considered as statutory function and no service tax can be levied on such fees collected for discharging the sovereign function. The lower authorities have, however, taken the view that the activity undertaken is not in the nature of statutory duty, but an activity undertaken for a consideration which is not a statutory fee. We find ourselves unable to agree to this stand taken by the lower authorities. The police department has the mandatory duty to maintain public peace and order. For such duty, which is in the nature of sovereign function, no charges are recoverable from the citizens. In the present case, the police department has recovered fees for deploying additional police personnel on request. However, the statutory functions of the police of the State Govt. make it explicit that such activity, even at request of the other person, is to be carried out only for the purpose of public security or for the maintenance of public peace or ....