Whether security services provided by Police department liable to service tax?

PJ/CASE LAW/2014-15/2439

Case:-MUMBAI POLICE Vs COMMISSIONER OF SERVICE TAX, MUMBAI-I

Citation:-2014-TIOL-2173-CESTAT-MUM

Brief Facts:- The appeal and stay petition are directed against Order-in-Original no. 97-98/STC-I/SKS/13-14dated 5/11/13 passed by Commissioner, Service Tax-I, Mumbai. Vide the impugned order, theld. Adjudicating authority has confirmed a service tax demand of Rs.13,54,03,947/- againstMumbai police along with interest thereon and has also imposed a penalty amount of Rs.10.88crores. The period of demand is from 01/5/2006 to 31/02/2012. In the said order, the ld.Commissioner has come to the conclusion that the services provided by the Mumbai Police to individuals or organizations in conducting various private and public events come under thepurview of 'Security Agency Services'. Aggrieved of the same, the appellant is before Tribunal.

Appellant’s Contention:- The ld. Consultant for the appellant submits that, the aforesaid services are undertaken bythe Mumbai Police in terms of the provisions of section 47 & 48 of the Mumbai Police Act, 1951.In terms of the aforesaid provisions, the Competent Authority, on an application by any person,may depute additional number of Police to keep the peace, to preserve order and to enforce anyof the provisions of the said Act for the period specified therein and the cost of such provisionsshall be borne by the person who makes the application. Similarly, under section 48,employment of additional Police is made at large works which is being carried on or any publicamusement, which is being conducted, if it is likely to impede the traffic or to attract largenumber of people and the behaviour or a reasonable apprehension of the behaviour of thepersons employed necessitate employment of additional Police, the Competent authority shallemploy the police force at such place for such period and the cost of such deployment has to beborne by the person, who undertakes the work. The ld. Consultant submits that it is in terms ofthe provisions of the said Police Act, deployment of additional police force is made. He alsosubmits that application has to be considered by the Government and usually the Governmentpasses a resolution permitting the deployment of forces. The ld. Consultant further submits thatthe cost for such provision of services paid by the recipients, gets credited to the Consolidatedfund of the State and does not go into the kitty of the Bombay Police. Similarly, the expenditurefor deployment of forces has to be met from the budget allotted to the Mumbai Police. Thereforethe nature of the activity undertaken by the Bombay Police is of the nature of a sovereignfunction relating to maintenance of law and order and the said service does not fall within thecategory of 'Security Agency Services' as defined in section 65(94) read with section 65(105)(w)of the Finance Act, 1994. Accordingly, he pleads for grant of stay.

The ld. Consultant relied on the decisions of this Tribunal in Dy. Comm. Police vs. Commissioner of C.Ex., Jaipur-II [2013-31 STR 228(Tri-Del)], where in identical circumstances, stay has been granted by this Tribunal. He also brought support from the decisions of Bombay High Court in the case of Security Guards Board vs. Comm. Of Central Excise, Thane II [2011(24)STR 391(Bom.)] wherein it was held that a statutory body is not liable to service tax under section 65(94) of the Finance Act, 1994. The ratio of the decisions be applied to the facts of the present case.

Respondent’sContention:- The ld. Addl. Commr. (AR) appearing for the Revenue reiterates the findings of Adjudicating authority and submits that in the case of Central Industrial Security Forces (CISF), which also provides security services to various central government establishments including government departments, it has been held that such services would fall within purview of 'Security Agency Service' and CISF has been discharging service tax liability thereon. Ld. Addl. Comm. Also relies on CBEC Circular no. 137/131/2010 dated 2011, wherein it has been, inter alia, clarified that the services provided by the state police in providing 'Escort' service to banks and other establishments could not be said to be statutory and sovereign functions and, therefore, such services are liable to service tax under 'Security Agency Services'.

Reasoning of Judgment:- The Tribunal has carefully considered the submissions made by both the sides.

The Tribunal have read the provisions of the section 47 and 48 of the Mumbai Police Act, 1951. The said provisions, prima facie, suggest that the services provided by deployment of additional police force, either to individuals or for public events, partakes the nature of maintenance of peace and preservation of order. Further, the costs paid by the service recipients gets credited to the consolidated fund of the State, which is also suggestive of statutory/sovereign nature of the function. Further, the issue whether security services provided by the Police is also a security service is a triable issue. Both the Tribunal and the Hon'ble Bombay High Court in the cases cited (supra) have taken a prima facie view that such services may not be liable for service tax. Thus, the appellant has made a strong case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against appellant and stay recovery thereon during the pendency of the appeal. Since, Revenue involved is substantial both side are at liberty to seek early hearing of the appeal.

Decision:-Stay granted.

Comment:- The analogy of the case is that the services provided by deployment of additional police force, either to individuals or for public events, partakes the nature of maintenance of peace and preservation of order. The costs paid by the service recipients gets credited to the consolidated fund of the State, which is also suggestive of statutory/sovereign nature of the function. Thus, such services provided by the Police are prima facie not leviable to service tax.

Prepared by: Meet Jain

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PJ/CASE LAW/2014-15/2439

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