By TIOL Research Team

THIS question just “popped” out of nowhere. A quick scan through the available publications/circulars and the answers began flowing in the negative.

We desist from finding an answer to the primordial question whether CISF (Central Industrial Security Force) governed by Ministry of Home Affairs is covered within the ambit of category “Security Agency”, as envisaged in Section 65(94) of the Finance Act, 1994 , but only place the following facts to enable the discernible netizen to do the same.

The statutory definition of the word security agency is as follows :

“Security agency'' means any commercial concern engaged in the business of rendering the 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 or a personal nature or otherwise, including the services of providing security personnel.”

In relation to a “security agency”, taxable service is defined in section 65(105)(w) of the Finance Act, 1994 .

The expression commercial concern since not defined we utilize the dictionary meaning of the word “commercial”. As per Black's Law Dictionary, the word `commercial' means : is `relates to or is connected with trade and traffic or commerce in general; is occupied with business and commerce. Generic term for most/all aspects of buying and selling.

Simply put, the person must be a business organization, having profit motive .

The department has clarified (Trade notice no. 1/96-ST, dated 31.10.1996, Mumbai-I Commissionerate) that the Directorate of Audio and Visual Publicity (DAVP) in the Ministry of Information and Broadcasting is not an ‘advertising agency' and hence not liable to pay service tax in relation to Government advertisements for which it renders service, because the DAVP is not a ‘commercial concern'.

Adopting the same logic, one would be lulled to conclude that CISF or for that matter the C.B.I, C.I.D and police departments since not “commercial concerns” (!) cannot be covered under the category of service provider “security agency”.

Netizens may recollect that last week TIOL in its breaking news section brought to the limelight the massive revenue loss in the matter of classification of “CD deck mechanism” , and where it was emphasized that a quick browse on the net would have helped prevent the revenue drain. A similar exercise was conducted in the instant matter and pronto the google threw up a website with the following address, namely cisf.nic.in .

A few passages appearing on the site (which apparently is not updated regularly and has a number of grammatically incorrect sentences) are worth reproducing here :

Origin : Central Industrial Security Force was set up under an Act of Parliament on 10th March 1969 with a strength of around 2,800 personnel. Subsequently, CISF was made an Armed Force of the Union by an Act of Parliament passed on 15th June 1983. Today, it one of the largest Paramilitary Force of the nation with a strength of over 95,485 personnel.

Message from the Director General, Central Industrial Security Force:

++ The CISF has been in the business of Industrial Security for the last 30 years.

++ We have been providing security to the Government's vital industrial, commercial and strategic installations.

++ So far, our experience and expertise have been available only to the Government.

++ We understand and appreciate that the protection of private industries would also be essential for the country's economic growth.

++ We have now been permitted by the Government to share our experience and expertise, in form of consultancy services, with the private sector.

++ We have a large force of experienced and talented officers. Our team consists of officers from multi-disciplinary fields including engineers and management professionals. The range of services we offer includes security audit, safety audit, assessment of manpower and assessment of gadgetry.

++ We provide complete solutions which would cover all dimensions including perimeter security, access control, surveillance and integrated technical solutions.

The preamble to the Central Industrial Security Force Act, 1968 (no. 50 of 1968) as modified vide Act no. 14 of 1983, 20 of 1989 and 40 of 1999 reads as under :

“An Act to provide for the constitution and regulation of an armed force of the Union for the better protection and security of Industrial Undertakings owned by the Central Government and certain other Industrial Undertaking, employees of all such Industrial Undertakings and to provide technical consultancy service to industrial establishments in the private sector and for matters connected therewith.” (Emphasis supplied)

Section 14A(I) of CISF Act, 1968 reads thus :

14A(I) Subject to any general directions which may be issued by the Central Government. It shall be lawful for the Director General, on a request received from the Managing Director of an industrial establishment in the private sector or any other person authorised by him in his behalf, to direct the members of the Force to provide technical consultancy services relating to security, to such industrial establishments in such manner and on payment of such fee as may be prescribed.

(2) The fee received under sub-section (1) shall be credited to the Consolidated Fund of India. Explanation - For the purpose of this section, the expression "Managing Director" in relation to an industrial establishment, means the person (whether called general manager, manager, chief executive officer, or a partner of a firm or by any other name) who exercises control over the affairs of the establishment."

Upon reading the preamble and the contents of Section 14A(I) of the CISF Act, 1968, the fact which emerges is, the “commercial activity” which the CISF undertakes is when it either provides security to other Industrial Undertakings (in the private sector) and its employees or provides technical consultancy services relating to security and charges “fees” for the same. Mind you, these fees are to be credited to the Consolidated Fund of India .

We move further on the site and find the following interesting information relating to the spectrum of services offered and the clientele list etc., and wherein also it is amply clarified that the clients are required to make payments viz. “fees” for the services rendered. Obviously, the above transaction is clearly a “commercial one” and with a “profit motive” .

Spectrum of services offered by CISF :

1. Threat Perception & Risk analysis

2. Access Control & Perimeter protection

3. Assessment of Manpower requirements

4. Security systems applications

5. Security & Fire Audit

6. Document security

7. Procedures for material , Cash & inventory movement.

8. Internal intelligence & security audit procedures.

9. Fire protection measures

10. Crisis management schemes

11. Executive Protection.

12. Crowd control and management procedures

13. Training in security & fire protection matters to the officers and men

List of clients includes big names from Corporate World as well as Govt. Organisation.

List of clients for whom Consultancy Assignments have been successfully completed

1. Andhra Pradesh Assembly & Secretariat.

2. VSNL Kolkata

3. Delhi Metro Railways.

4. Passport Offices.

5. IIT Kharagpur

6. National Institute of Criminology & Forensic Sciences, New Delhi

7. Sir Shadilal Sugar mill, Muzaffarnagar , UP

8. TTPP Tanda ( NTPC) UP

9. Inland Container depot , New Delhi .

10. U.P Secretariat , Lucknow

11. British High Commission

12. UCIL Meghalaya

13. ONGC Nagaland

14. Paradip Port Trust

15. Indian Embassy , Kathmandu

16. ICICI bank Ltd

17. Sardar Sarovar Nigam Ltd

18. IDRBT( Institute for development and research in banking technology)

19. Archeological survey of India

Projects in the preliminary stage of negotiation

1. Deepak Fertilizers and Petrochemicals Ltd

2. Maruti Udyog Ltd

3. Ranbaxy Ltd

4. Oswal Industries Ltd

5. Sahara India Ltd

6. MRF Ltd

7. Kolkatta Improvement trust Ltd

8. Udaipur Municipal Council

9. Tata Thermal Power Plant ( Trombay , Mumbai )

10. Karur Vysya bank Ltd

11. Kanoria Chemicals Ltd

12. NSG HQrs at Palam

13. Mother Diary Kolkatta

14. Finolex Cables Ltd.

15. PNC Constructions Ltd

16. 08 ONGC Institutes at Mumbai

The advantages of choosing CISF over other organizations have also been vividly detailed on the site.

The above information appearing on the CISF website, would surely compel us to give an affirmative answer to our original question but at the same time may also require us to rephrase the preliminary question as :

Whether CISF is required to pay Service Tax under the category:

a) Commercial training or coaching services; OR

b) Management consultant's services; OR

c) Scientific or technical consultancy services. ? OR

d) Security Agency Services.

Are there any answers, or should the Board clarify the issue or issue an exemption notification. Incidentally, whichever category these “varied technical consultancy services relating to security” may fall into, the fact remains that any exemption notification issued has to have a retrospective effect.

Fortunately, there is section 83 of the Finance Act, 1994 which allows usage of the provisions of Section 11C of the Central Excise Act, 1944 which reads “Power not to recover duty of excise not levied or short-levied as a result of general practice” .

Any which way you look at it, mind you it is prudent to follow the old adage, better late than never.