The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi Bench ruled that no service tax can be levied on security services provided by the Home Guards Department as it is a part of its statutory function.
The appellant is the Commandant of Home Guards in the State of Rajasthan created under the Rajasthan Home Guards Act, 1963 for bridging the requirement of reserved police force required to maintain public safety, protection of persons and property, and maintenance of law and order. The Home Guards department is a part of the Ministry of Home Affairs, Government of Rajasthan, and is called out by the Police Department for maintenance of law and order. The appellant also provides security to various Government departments and firms and charges some amounts. Revenue was of the opinion that this provision for providing the security and collection of a consideration amounts to rendering “security agency service” as per Section 65(105)(w) of the Finance Act, 1994 read with Section 65(94).
The revenue contended that the term “security Agency service” covers any person engaged in the business of rendering the services relating to the security and, therefore, the appellant is covered by this definition. It is undisputed that the appellant was providing the service and collecting a consideration for it. Prior to 1.5.2006, the term “security agency” covered only “commercial concerns” engaged in the business of rendering services relating to security. After 1.5.2006, “any person” who provides security services gets covered under the terms security agency service. It is the case of the Revenue that the expression “any person” includes a Government or local authority and, therefore, the appellant has to pay service tax.
Mr. Rahul Lakhwani, the counsel for the appellant contended that the term „person‟ appearing in the definition must be construed to be a natural person and by no stretch of imagination will include the State or its officers or the posts created under a statute as held by the Constitution Bench of the Hon‟ble Supreme Court in the case of West Bengal Vs. Union of India. Since the State cannot be a person, it cannot be a “security agency”. Therefore, no service tax under the head security agency service can be charged on the amounts collected by the Police or Home Guards or any officers of the Government for providing security.
The coram of Judicial Member, Anil Choudhary, and Technical Member, P.V. Subba Rao noted that the Appellant, in the present case was the Home Guards department in the State of Rajasthan constituted under the Act providing security services to various government as well as private offices. The Tribunal noted that the Home Guards department is a part of the Ministry of Home Affairs, Government of Rajasthan and are called out by the Police Department for maintenance of law and order.
The Tribunal relied upon the case of Deputy Commissioner of Police, Jodhpur Vs. Commissioner of Central Excise & Service Tax and Ors which was affirmed by the Supreme Court and held that the home guards department is an agency of state government and therefore, cannot be considered as ‘person’ engaged in the business of running security services. Moreover, it was also observed that the fees collected by the such department is in the nature of the fee prescribed for performing the statutory function, which is being deposited into the Government treasury. Therefore, there can be no levy of service tax on such activities carried out by the Home Guards department.
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