Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise And ... vs Order In Original ... on 25 November, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066. Date of Hearing: 03 & 04.10.2016 Date of Pronouncement: 25.11.2016 For Approval & Signature of : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes Sl. No. Appeal No. Appellant Respondent
Order-In- Appeal No. and Date 1 ST/3694/2012 The Deputy Commissioner Of Police Jodhpur Commissioner of Central Excise and Service Tax,Jaipur-ii Order in Original No.26-28-2012-ST-JPR-II-COMMISSIONER, dated 24.08.2012 2 ST/3760/2012 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-ii Order in Original No.26-28-2012-ST-JPR-II-COMMISSIONER, dated 24.08.2012 3 ST/55448/2013 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-ii Order in Original 26-28-2012-ST-JPR-II-COMMISSIONER, dated 31.08.2012 4 ST/59142/2013 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Original 22-2013-ST, dated 26.04.2013 5 ST/59330/2013 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Original 2-2013-ST-COMMISSIONER, dated 30.01.2013 6 ST/59331/2013 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Original 25-26-213-ST-COMMISSIONER, dated 15.05.2013 7 ST/60445/2013 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Original 23-2013-ST-APP, dated 30.04.2013 8 ST/50656/2014 Superintendent Of Police (hanumangarh) Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 175-180-VC-ST-JPR-I-2013, dated 04.11.2013 9 ST/50845/2014 Superintendent Of Police ( Bikaner) Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 175-180-VC-ST-JPR-I-2013, dated 04.11.2013 10 ST/50944/2014 Superintendent Of Police (churu) Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 175-180-VC-ST-JPR-I-2013, dated 04.11.2013 11 ST/50945/2014 Superintendent Of Police (dausa) Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 175-180-VC-ST-JPR-I-2013, dated 04.11.2013 12 ST/50973/2014 Superintendent Of Police (jhunjhunu) Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 175-180-VC-ST-JPR-I-2013, dated 04.11.2013 13 ST/51046/2014 Superintendent Of Police (bundi) Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 175-180-VC-ST-JPR-I-2013 , dated 04.11.2013 14 ST/51804/2014 Deputy Commissioner Of Police Jodhpur Commissioner of Central Excise and Service Tax,Jaipur-ii Order in Appeal 355-OPD-CE-JPR-II-2013, dated 26.12.2013 15 ST/52621/2014 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 235-36-VC-ST-JPR-I-2013, dated 24.12.2013 16 ST/52622/2014 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 235-36-VC-ST-JPR-I-2013, dated 24.12.2013 17 ST/52994/2014 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 253-VC-ST-JPR-I-2013, dated 31.12.2013 18 ST/53308/2014 Superintendent Of Police Commissioner of CUSTOMS,Indore Order in Appeal IND-CEX-000-APP-61-62-2014, dated 03.03.2014 19 ST/53923/2014 The Superintendent Of Police Commissioner of CUSTOMS,Indore Order in Original 07-08-COMMR-ST-IND-2013, dated 12.04.2014 20 ST/53924/2014 Superintendent Of Police Commissioner of Customs Central Excise and Service Tax,Bhopal Order in Appeal BPL-EXCUS-000-APP-009-14-15, dated 11.04.2014 21 ST/53925/2014 Superintendent Of Police Commissioner of Customs Central Excise and Service Tax,Bhopal Order in Appeal BPL-EXCUS-000-APP-032-14-15, dated 13.05.2014 22 ST/50360/2016 Superintendent Of Police Commissioner of Central Excise and Service Tax,Jaipur-i Order in Appeal 276-AK-ST-JPR-2015, dated 22.12.2015 23 ST/50517/2016 Superintendent of Police COMMISSIONER OF CUSTOMS, EXCISE & SERVICE TAX,ALWAR Order in Appeal 01-AK-ST-JPR-2016, dated 13.01.2016 24 ST/51746/2016 Superintendent of Police Commissioner of Central Excise and Service Tax,JAIPUR-I Order in Appeal 54-AK-ST-JPR-2016, dated 25.02.2016 25 ST/51782/2016 Superintendent of Police Commissioner of Central Excise and Service Tax,JAIPUR-II Order in Appeal 72-75-AK-ST-JPR-2016, dated 29.02.2016 26 ST/51928/2016 Superintendent of Police Commissioner of Central Excise and Service Tax,JAIPUR-I Order in Appeal 278-AK-ST-JPR-2016, dated 22.12.2015 27 ST/52610/2016 Superintendent of Police CCE&ST, Jaipur-II Order in Appeal 28TO29-AK-ST-JPR-2016, dated 27.01.2016 28 ST/52611/2016 Superintendent of Police CCE&ST, Jaipur-II Order in Appeal 02-AK-ST-JPR-2016, dated 13.01.2016 Appearance Mr. Rahul Lakhwani, CA Mr. Mayank Garg, Advocate Mr. Sanjay Tiwari, CA Ms. Renu Gupta, Advoate Mr. Vijay Kumar, Advocate Mr. RM Yadav, Advocate - For Appellant Mr. Govind Dixit, DR - For Respondent CORAM: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) Final Order Nos.55321-55348, dated 25.11.2016 Per Mr. V. Padmanabhan :
The present batch of appeals have been filed against various orders passed by the lower authorities challenging the demands for service tax confirmed against the Police Department in the name of Superintendent of Police of various districts in the State of Rajasthan. 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 Finance Act, 1994.
2. The brief facts of the case are summarized below:-
(i) Superintendents of Police of various districts in the State of Rajasthan are alleged to have been engaged in providing Security Agencys services covered under Section 65 (105)(w) of Finance Act, 1994 without having the registration for the services. As per Section 65(94) of the Finance Act, 1994, Security Agency means any person engaged in the business of rendering 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 of a personal nature or otherwise, including the services of providing security personnel.
(i) As per Section 65(105)(w) of the Finance Act, 1994 taxable service means any service provided or to be provided to any person, by a security agency in relation to the security of any property or person, by providing security personnel or otherwise and includes the provision of services of investigation, detection or verification of any fact or activity. Prior to 01.05.2006, Security Agency Services were taxable only if such services were provided by a commercial concern, but with effect from 1.5.2006 the term commercial concern has been substituted with the term any person. The appellants were providing Police personnel to various organizations such as banks and other individuals, on their request, towards security of persons, property, cash etc. and collecting charges for such services provided by them. They were also sending police personnel for character verification of candidates selected for various jobs and collecting charges for the activity. However they failed to take registration with the department nor did they deposit the service tax for the charges recovered for providing these services.
(ii) Revenue took the view that the appellants, though an agency/department of State Government and responsible for maintenance of law and order and security to public at large, was providing Security Agency Services in relation to property as well as personal security for a consideration. The Central Board of Excise and Customs, New Delhi has also clarified the issue of taxability in respect of services provided by public authorities vide Circular No.89/7/2006-ST dated 18.12.2006 that:
activities assigned to and performed by the sovereign / public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of compulsory levy and are deposited in the Govt. Account. However, if a sovereign or public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for consideration (not a statutory fee), then in such cases service tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined.
(iii) Accordingly Show Cause Notices were issued by various jurisdictional Service Tax authorities for recovery of Service Tax on the charges recovered by Police under proviso to Section 73(1) of the Finance Act, 1994 along with the interest payable under Section 75 of the Finance Act, 1994 and also penalties under various Sections of the Finance Act 1994. The Show Cause Notices culminated in the issue of the impugned orders which stand challenged before us in the present proceedings.
3. The main grounds of appeals are summarised below:
(i) The term person appearing in the definition of Security Services will not include the State and instrumentalities thereof. Hence no Service Tax is payable by the State governments.
(ii) State Police cannot be said to be engaged in the business of Security Services. Since being engaged in the business of Security Services is a condition precedent, there is no service tax liability.
(iii) They are not engaged in the business of rendering services relating to security.
(iv) The Central Board of Excise and Customs has dealt with the issue of levy of service tax on the charges recovered by any sovereign/public authority carrying out any statutory function in their Circular no. 96/7/2007-ST dated 23.8.2007 wherein it has been clarified that no service tax would be payable if all the following conditions are satisfied:-
(a) Sovereign / public authorities perform duties which are in the nature of statutory & 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. In the case of the State Police Department, all the aforesaid conditions are duly satisfied and hence it is clear that the activity in question squarely falls within the corners of the department circular and hence the impugned demand is unsustainable in terms of the departments own clarification.
(v) The Adjudicating Authority has grossly erred in appreciating the facts of the present case. The activity of deploying police force by the Appellant is part of its statutory duty of maintaining law and order. However, the Additional Commissioner, without appreciating the facts, held that the activity in question is not a statutory function and thereon liable to Service Tax. The findings of Additional Commissioner are incorrect and therefore the impugned demand needs to be set aside.
4. On behalf of the appellants (police department), arguments were advanced by the following ld. Counsels:-
(a) Mr. Rahul Lakhwani, CA
(b) Mr. Mayank Garg, Advocate
(c) Mr. Sanjay Tiwari, CA
(d) Ms. Renu Gupta, Advoate
(e) Mr. Vijay Kumar, Advocate
(f) Mr. RM Yadav, Advocate
5. The following case laws were relied upon by the ld. Counsels for the appellants:-
(a) Mumbai Police Vs. CST, Mumbai [2015 (37) sTR 483 (Tri.-Mumb)]
(b) Security Guards Board Vs. CCE, Thane-II [2011 (24) STR 391 (Bom.)]
(c) DCP Vs. CCE, Jaipur-II [ 3024 (31) STR 228 (Tri.-Del.)]
(d) State of West Bengal Vs. Union of India [AIR 1963 SC 1241]
(e) Maharashtra Industrial Development Corporation Vs. CCE, Nasik [2014 (36) STR 1291 (Tri.-Mumb)]
(f) The State of Uttar Pradesh Vs. Mohammad Naim [AIR 1964 SC 703]
(g) State of Bihar & anr. Vs. JAC Saldanha & Ors [AIR 1980 SC 326]
(h) Punjab Ex-servicemen Corporation Vs. CCE, Chandigarh [2009 (13) STR 529 (Tri.-Del.)]
(i) Surat Municipal Corporation Vs. CCE, Surat [2006 (4) STR 44 (Tri.-Del.)].
6. Revenue was represented by Shri Govind Dixit, ld. Departmental Representative and he reiterated the views of the authorities below. His submission is that with effect from 01.05.2006, the definition of Security Agency Service under section 65(94) of the Act has been amended and the word commercial person has been replaced with any person. After such amendments, the security services provided by the Govt. departments also would stand covered for levy of service tax. The police departments have provided such services on cost recovery basis to individuals, to safeguard property, banks, etc. which would be squarely covered within the amended definition of security agency service and consequently service tax is liable to be paid. He further submitted that in the case of Central Industrial Security Forces (CISF), which also provides security services to various Central Govt. establishments including Govt. departments, CBEC has clarified that such services would fall within the purview of Security Agency Service and CISF has been discharging service tax liability thereon. The CBEC vide its circular No.137/131/2010, dated 20.05.2011 has clarified that the services provided by the State Police to banks and other establishments could not be stated to be a statutory and sovereign function and therefore such services are liable to service tax. He further cited the case laws of Kerala High Court decision in the case of Secretary to Govt., Dept. of Agriculture, Kerala Vs. Union of India [2015 (40) STR 438 (Ker.)] and Tribunals decision in the case of Chhattisgarh State Industrial Development Corporation Ltd. Vs. CCE, Raipur [Final Order No.ST/A/51952/2016-CU[DB], dated 03.06.2016].
7. We heard both sides and perused the records.
8. The question for decision is whether the state police represented by the Superintendents of Police of various districts, would be covered within the definition of security agency services and service tax will be liable to be paid by them on the amounts recovered by them for providing security personnel to various organizations. Further, they were also sending police personnel for character verifications of candidates selected for various jobs and collecting charges but they neither got the registered with the Department nor did they pay service tax on such amounts recovered.
As per Section 65(94) of the Finance Act, 1994, the definition of Security Agency as well as Security Agency Service are given below for ready reference:-
Security Agency means any person engaged in the business of rendering 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 of a personal nature or otherwise, including the services of providing security personnel.
9. The other relevant circular issued by CBEC is circular No. 89/7/2006-ST dated 18.12.2006 is reproduced below:
The activities assigned to and performed by the sovereign / public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of compulsory levy and are deposited in the Govt. Account. However, if a sovereign or public authority provides a service , which is not in the nature of statutory activity and the same is undertaken for consideration (not a statutory fee), then in such cases service tax would be leviable as long as the activity undertaken falls within the scope of a taxable se4rvice as defined.
10. The appellants have argued that the term person appearing in the definition must be construed to be a natural person as well as a juristic person and by no stretch of imagination, the same will include the State or its officers or the posts created under a statute. They cited the judgement of the Constitution Bench of the Hon'ble Supreme Court in the case of West Bengal Vs. Union of India [AIR 1963 SC 124] in which the Apex Court has held as under:-
the definition is an enlargement of the natural meaning of the expression person, even the extended meaning does not include the State. Their submission is that Superintendent of Police is an authority of the State Govt. to carry out statutory and constitutional duties. The definition of the term person, (which does not cover the Govt.) in the General Clause Act, 1897 is given as follows:-
42. Person shall include any company or association or body of individuals, whether incorporated or not, In the light of the definition of the term person in the General Clause Act, 1897, which has also been examined and clarified by the apex court, it would appear that the Superintendent of Police, which is an agency of the State Govt. does not appear to be covered within the term person. It is also noteworthy that in the year 2012 when the pattern of levy of service tax was changed and the concept of negative list was introduced with effect from 01.07.2012, a definition was introduced for the term person in Section 65B (37), of the Act, which includes the Govt., local authorities, etc. From this, it is evident that such a definition for the term person has become part of the statute only from this date. To decide the meaning of person upto this date, we will have to refer to the General Clause Act, 1897 as well as relevant case laws. The Apex Court has clearly held that the definition of person cannot be extended to include State. Consequently, we are of the view that the Superintendent of Police will not be covered within the term person.
11. The second leg of the argument advanced by the appellants is that they are not engaged in the business of rendering services relating to security. Their submission is that the occupation in business by a person is a condition precedent for a security agency. The lower authority has held that the term business does not signify any commercial activity for the purpose of gaining something out of the said activities, but the same has been used in terms of the work. He has accordingly held that as long as consideration is being received by police for providing security service, it is to be presumed to be in the nature of business.
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. It is also the submission of the police department that the deputation of additional police force at the request of banks and other institutions or other events has been done only for maintenance of law and in the absence thereof there could arise major security issues in relation to person or property. In the light of the submissions made, we are of the view that the activities undertaken by the police, for which charges have been recovered, cannot be held to be in the nature of business activity.
12. Now, we turn to the CBEC circular No.89/7/2006-ST, dated 18.12.2006. The circular has indicated under what conditions an activity performed by a sovereign/public authority should be categorized as one which is liable to payment of service tax. The circular clarifies that charges recovered by any sovereign/public authority for carrying out any statutory function will not be liable for levy of service tax if all the following conditions are satisfied:-
(a) Sovereign / public authorities perform duties which are in the nature of statutory & 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.
The satisfaction of each of the above three conditions is analysed below:-
(i) A sovereign/public authority performs duties which are in the nature of statutory and mandatory obligation to be fulfilled in accordance with law.
The Superintendent of Police is an extended arm/ instrumentality/ agency of the State Government and is controlled and managed by the State Government. It is carrying out the activities as entrusted to it vide the Police Act which are statutory and constitutional in nature. The Appellant is required to discharge these statutory obligations for public security and maintenance of public peace and order. The appellant cannot carry out any activity beyond the legislative competence. The user charges are levied by the State Government for the deployment of Police Force for the maintenance of public peace, security and law and order as per Section 46 of the Police Act, Section 46 is reproduced below:-
46. Payment for Police service.- The State Government may levy from any person, who carries on any such occupation, gathering, exhibition, sale, entertainment, etc. for monetary gain, as may, for the purpose of public security or for the maintenance of public peace or order, require deployment of additional police force, such user charges as may be prescribed.
(ii)The fee collected should be levied as per the provision of relevant law.
The State Government, in exercise of powers conferred under Section 46 of the Police Act issued two notifications wherein the charges to be recovered for providing additional police force for the purpose of maintaining public security and law and order have been notified. Notification number 27 (2) Home/Gr.-6/ 84 dated 19.05.2008 which notifies the charges for police arrangement in central government offices/institutions/banks and other organizations, and notification number F.1(K)(16)Gr.-2/05 dated 15.01.2008 which notifies the charges to be recovered on providing/deploying/rendering police force for security purposes. In the notification number dated 19.5.2008, the charges fixed per day are as follows:
1Constable Rs 250 per day.2
Head constable Rs 300 per day With this it is wide and clear that the user charges are in the nature of amount collected as per the provision of the relevant law.
(iii) The amount collected is to be deposited into Government treasury.
As per the requirement of the General Finance Account Rules issued by the Rajasthan State Government, the Government dues are to be collected and paid into the Government treasury. The Appellant, therefore, is required to collect the usage charges and credit the same in the Rajasthan State Government treasury.
The submission made by the police department in this regard is that the fees recovered by them is for provision of additional police force. They have referred to Section 46 of the Rajasthan Police Act, 2007 and submitted that the additional police officers are deployed at the request of any person only for the purpose of public security or for the maintenance of public peace or order. The fees levied and collected for this purpose is strictly as per the Notification issued by the State Govt. under the above Section of the Act. The amounts so collected are mandatorily deposited into the Govt. treasury. Accordingly, they have submitted that all the conditions stipulated by the CBEC circular are satisfied and consequently the activities are to be considered as statutory function and no service tax can be levied on such fees collected for discharging the sovereign function.
The lower authorities have, however, taken the view that the activity undertaken is not in the nature of statutory duty, but an activity undertaken for a consideration which is not a statutory fee. We find ourselves unable to agree to this stand taken by the lower authorities. The police department has the mandatory duty to maintain public peace and order. For such duty, which is in the nature of sovereign function, no charges are recoverable from the citizens. In the present case, the police department has recovered fees for deploying additional police personnel on request. However, the statutory functions of the police of the State Govt. make it explicit that such activity, even at request of the other person, is to be carried out only for the purpose of public security or for the maintenance of public peace or order. The charge for deployment of such additional force is also prescribed by the statutory notification issued by the State Govt. In view of these facts, we are of the view that the activity of deploying police personnel on payment basis is to be considered as part of statutory function of the State Govt. and the fees recovered are to be considered as statutory. It is also not disputed that such amounts recovered have been deposited into the Govt. treasury.
13. On the basis of the above discussion, we conclude that 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. Consequently, the activity undertaken by the police is not covered by the definition of Security Agency under Section 64(94) of the Act. We also find that in terms of CBEC circular 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 circular also, there can be no levy of service tax on such activities carried out by the police department.
14. Both sides have relied on several case laws. However, none of the cases are squarely covering the present issue of levy of service tax on State Police. Some touching upon the subject have dealt with only stay petitions. As such, we have not discussed them at length.
15. In line with the above discussions, the appeals filed by the police department succeed. The impugned orders are consequently set aside.
[Pronounced in the Open Court on 25.11.2016] (Archana Wadhwa) Member (Judicial) (V. Padmanabhan) Member (Technical) SSK -4-