ST - Mumbai police is not a 'Security Agency' - not liable to pay service tax for security provided to banks, individuals, cricket matches: CESTAT
By TIOL News Service
MUMBAI, APRIL 04, 2018 : THE Appellant is Mumbai Police.
They are providing security to banks, individuals, security for cricket matches, IPL, World Cup, Mumbai Port Trust, Mazagaon Dock, Tata Power, FCI and for other functions.
They were issued show cause notice demanding service tax on the charges recovered by them for providing security on the ground that they are liable for service tax under the category of "Security Agency Services". The demand was confirmed by the adjudicating authority alongwith interest and penalty u/s 76, 77 and 78 were also imposed. For the record, the Service Tax demand was of Rs.13.54crores and penalty imposed was Rs.10.88crores.
The appellant had filed an appeal before the CESTAT.
We reported the Stay order as - 2014-TIOL-2173-CESTAT-MUM.
The appeals were heard recently.
The appellant submitted that the police is deployed to individuals or to places for the purpose of maintaining law and order; that they perform sovereign functions as held in case of Dy. Commissioner of Police, Jodhpur 2016-TIOL-3507-CESTAT-DEL and thus not liable for tax; that no proceedings can be initiated against the Appellant without implicating the State as held in case of Divisional Railway Manager 2013-TIOL-1891-CESTAT-DEL.
In the case of Dy. Commissioner of Police, Jodhpur 2016-TIOL-3507-CESTAT-DEL, the CESTAT while allowing the appeals inter alia held -
ST - Section 46 of the Rajasthan Police Act, 2007 - 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 FA, 1994 - appeal to CESTAT. Held: Police department, which is an agency of the State Govt., cannot be considered to be a person engaged in the business of running security services - Superintendent of Police is an authority of the State Govt. to carry out statutory and constitutional duties - Superintendent of Police is an extended arm/ instrumentality/ agency of the State Government and is controlled and managed by the State Government - The term business connotes that it is an activity undertaken with the intent of earning profit - The charges recovered by Police are in the nature of cost recovery for the additional police force deployed on request for maintaining security and law and order - activities undertaken by the police, for which charges have been recovered, cannot be held to be in the nature of business activity - Consequently, the activity undertaken by the police is not covered by the definition of Security Agency under Section 64(94) of the Finance Act, 1994 - Bench also finds that in terms of CBEC circular 96/7/2007-ST dated 23.8.2007 and 137/131/2010, dated 20.05.2011 on this subject, the fees collected by the police department is in the nature of fee prescribed for performing statutory function, which has been deposited into the Govt. treasury - In the light of the CBEC circulars also, there can be no levy of service tax on such activities carried out by the police department - appeals filed by the police department succeed - Impugned orders are consequently set aside: CESTAT [para 11, 12, 13, 15]
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The CESTAT observed that the issue is no more res integra.
The appellant also informed the Bench that the above order of the Tribunal has been upheld by the Apex Court vide Order dt.18.09.2017 in Diary Number 24355 of 2017.
After reproducing the findings of the Tribunal contained in the decision in Dy. Commissioner of Police, Jodhpur 2016-TIOL-3507-CESTAT-DEL, the CESTAT held that in the light of the above legal position, the demand made against the Appellant is not sustainable.
The impugned order was set aside and the appeal was allowed.
In passing: From a recent reply received by a RTI activist, it is learnt that the Mumbai Cricket Association is yet to clear a fee of Rs.13.42crores to Mumbai police for the protection it had provided for various cricket matches.
(See 2018-TIOL-1067-CESTAT-MUM)
