Security services provided by commercial concerns only liable to service tax prior to 18.04.2006.

PJ/Case Law/2013-14/1951

Case:-RAJPUTANA EX-SERVICEMEN CO-OP. SOCIETY Versus COMMR. OF C. EX., JAIPUR-I

Citation:-2013 (31) S.T.R. 248 (Tri.- Del.)

Brief facts:- The facts of the case are that Service tax of Rs. 3,39,680/- stands confirmed against the appellants on the finding that during the period October 2000 to March 2006, they have provided taxable service of Security Agency. In addition, penalty of identical amount stands imposed under Section 76 as also under Section 78 of the Finance Act, 1994. Penalty of Rs. 1,000/- stands imposed under Section 77 of the Act. Appellant is a co-operative society registered under Co-operative Societies Act, 1965 and is a society approved by Sainik Kalyan Vibhag, Government of Rajasthan, engaged in the welfare of ex-servicemen and their family members. They undertake contracts for providing security personnel and other jobs to provide re-employment to ex-servicemen. They provide security guards to various State Government Organisations like Rajasthan Rajya Vidyut Prasaran Nigam Ltd., RTO Kota, Rajasthan State Transport Corporation etc. As per the guidelines issued by Sainik Kalyan Vibhag, they were collecting the minimum wages + 5% service charges during 2000-2006. Show cause notice dated 19-4-2006 was issued to the appellant proposing confirmation of demand of service tax under the category of Security Agency Services.

Appellant’s contention:-The appellant contested the said demand on the ground that the security agency services are required to be rendered by a commercial concern and in as much as they were not commercial concern engaged in providing the said service, the appellant cannot be held liable to pay service tax. The definition of Security Agency was changed w.e.f. 18-4-2006 referring "any person" engaged in the business of rendering services instead of 'commercial concern'. With effect from 18-4-2006, they have started paying service tax. Inasmuch as the period in the present appeal is prior to 18-4-2006, they cannot be held liable to pay any service tax as they are not commercial concern engaged in the business of rendering services relating to the security service.

Respondent’s contention:-The respondent reiterated the findings and submissions of the lower authorities.

Reasoning of Judgment:- After considering the records and hearing the submissions, the tribunal finds that an identical issue was considered by the Tribunal in the case of Bhootpurva Sainik Society and Others vide Final Order No. ST/457-67/2001 -CU(DB), dated 8-9-2011 [2012 (25) S.T.R. 39 (Tribunal)]. It was held that the society of ex-servicemen engaged in providing security services so as to provide re-employment of ex-servicemen, cannot be held to be a commercial concern. Inasmuch as during the relevant period, the security agency services rendered by commercial concern was liable to pay service tax and the appellant not being a commercial concern, cannot be held to be liable to pay tax. As such, by following the above decision, the adjudicating authority set aside the impugned order and allowed the appeal with consequential relief to the appellant.

Decision:-Appeal allowed.

Comment:-The crux of the case is that as the definition of taxable service with respect to security services was amended w.e.f. 18.04.2006 so as to levy service tax provided by ‘any person’ with respect to security services, service tax for the period prior to 18.04.2006 cannot be leviable if the said service has been provided by non-commercial concern. Consequently, the service tax demand for the period prior to 18.04.2006 with respect to non-commercial concerns was set aside and the appeal was allowed with consequential relief.

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PJ/Case Law/2013-14/1951

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