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ST - Providing armed security guards to PSU u/s 13 of Police Act, 1861, is carrying out of statutory function and not liable to service tax: CESTAT

By TIOL News Service

NEW DELHI, MAR 22, 2017: THE DIG of Police is in appeal against the O-in-O passed by CCE, Bhopal whereunder demand of service tax of Rs.1,33,19,821/- along with equivalent penalty has been confirmed.

The brief facts are that the appellant is a part of MP State Police force. They have statutory responsibility for maintenance and enforcement of public law and order. They are also providing arms, security guards to public sector banks/undertakings and government departments under Section 13 of Police Act, 1861 on collection of actual expenditure/cost , which has been called as 'consideration' under the contract.

The issue is whether providing armed security guards to public sector banks / undertakings and govt. departments is to be covered under the definition of 'security services' and collection of charges for the same will be liable to service tax under the Finance Act, 1994.

CBEC vide Circular No. 89/7/2006-ST dated 18.12.2006 has clarified that wherever the charges collected by any sovereign public authority are for carrying out any statutory function, the same is not liable to levy of service tax if following three conditions are satisfied:

(a) Sovereign/public authorities perform duties which are in the nature of statutory and 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.

After considering the submissions made, the Bench observed -

+ We are of the view that the appellant is performing statutory duties and the amount so collected is being deposited in the govt. treasury.

+ It is on record that the appellant is depositing the money collected on account of the subject services in the govt. treasury. It is also on record that the appellant is performing statutory function which is one of the three conditions of the CBEC Circular dated 18.12.2006 and it has also been claimed that the collection of the fee levied by the appellant is as per the provisions of relevant law.

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-940-CESTAT-DEL)


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