Police Security Services Performing Statutory Duties Not Taxable: CESTAT Mumbai

Superintendent of Police (Rural) Vs Commissioner of Central Excise (CESTAT Mumbai)

Summary: CESTAT Mumbai allowed the appeal of Superintendent of Police (Rural) against the order confirming service tax demand of Rs.3,19,421/- on charges collected for providing armed security guards to public sector banks, undertakings and government departments. The appellant, being part of the Maharashtra State Police force, was responsible for maintenance and enforcement of public law and order and provided armed security guards under Section 13 of the Police Act, 1861 by recovering the actual expenditure/cost. The issue before the Tribunal was whether this activity constituted taxable “security services” under the Finance Act, 1994. The Tribunal observed that the appellant was performing statutory duties and the amounts collected were deposited in the Government treasury. It relied upon Circular No.89/7/2006-ST dated 18.12.2006, under which charges collected by a sovereign/public authority for statutory functions are not liable to service tax where the functions constitute statutory and mandatory obligations, the fee is levied under the relevant law and the amount is deposited into the Government treasury. The Tribunal further relied upon the CESTAT decision in Dy. Commissioner of Police & Others Vs. CCE, Jaipur & Others, where the police department, being an agency of the State Government, was held not to be a person engaged in the business of running security services. It also referred to Mumbai Police Vs. Commissioner of Service Tax, Mumbai-I [2018-TIOL-1067-CESTAT-MUM], where the Mumbai Bench had expressed the same view. Respectfully following these decisions, CESTAT allowed the appeal and set aside the impugned order.